In the commercial and legal parlance of most countries, a general partnership,
refers to an association of persons or an unincorporated company with the
following major features: Created by agreement, proof of existence
and estoppel. Formed by two or more persons
The owners are all personally liable for any legal actions and debts the company
may face, unless otherwise provided by law or in the agreement.
It is a partnership in which partners share equally in both responsibility and
liability. Characteristics
Partnerships have certain default characteristics relating to both the
relationship between the individual partners and the relationship between
the partnership and the outside world. The former can generally be overridden
by agreement between the partners, whereas the latter generally cannot be
overridden this way. The assets of the business are owned on
behalf of the other partners, and they are each personally liable, jointly and
severally, for business debts, taxes or tortious liability. For example, if a
partnership defaults on a payment to a creditor, the partners' personal assets
are subject to attachment and liquidation to pay the creditor.
By default, profits are shared equally amongst the partners. However, a
partnership agreement will almost invariably expressly provide for the
manner in which profits and losses are to be shared.
Each general partner is deemed the agent of the partnership. Therefore, if that
partner is apparently carrying on partnership business, all general
partners can be held liable for his dealings with third persons.
By default a partnership will terminate upon the death, disability, or even
withdrawal of any one partner. However, most partnership agreements provide for
these types of events, with the share of the departed partner usually being
purchased by the remaining partners in the partnership.
By default, each general partner has an equal right to participate in the
management and control of the business. Disagreements in the ordinary course of
partnership business are decided by a majority of the partners, and
disagreements of extraordinary matters and amendments to the partnership
agreement require the consent of all partners. However, in a partnership of
any size the partnership agreement will provide for certain electees to manage
the partnership along the lines of a company board.
Unless otherwise provided in the partnership agreement, no one can become
a member of the partnership without the consent of all partners, though a
partner may assign his share of the profits and losses and right to receive
distributions. A partner's judgment creditor may obtain an order charging
the partner's "transferable interest" to satisfy a judgment.
Separate legal personality There has been considerable debate in
most states as to whether a partnership should remain aggregate or be allowed to
become a business entity with a separate continuing legal personality.
In the United States, section 201 of the Revised Uniform Partnership Act of 1997
provides that "A partnership is an entity distinct from its partners." This
is one of the more significant departures of RUPA from the 1917 Uniform
Partnership Act, which does not recognize separate legal personality for
partnerships; however, the degree to which this theory was actually respected
varied by jurisdiction and over time. In England and Wales, a partnership does
not have separate legal personality. Although the English & Welsh Law
Commission in Report 283 [1] proposed to amend the law to create separate
personality for all general partnerships, the British government
decided not to implement the proposals relating to general partnerships. The
Limited Liability Partnerships Act 2000 confers separate personality on limited
liability partnerships—separating them almost entirely from general
partnerships and limited partnerships, despite the naming similarities. In
Scotland partnerships do have some degree of legal personality.
While France, Luxembourg, Norway, the Czech Republic and Sweden also grant
some degree of legal personality to business partnerships, other countries
such as Belgium, Germany, Italy, Switzerland and Poland do not allow
partnerships to acquire a separate legal personality, but permit partnerships the
rights to sue and be sued, to hold property, and to postpone a creditor's
lawsuit against the partners until he or she has exhausted all remedies against
the partnership assets. In December 2002 the Netherlands
proposed to replace their general partnership, which does not have legal
personality, with a public partnership which allows the partners to opt for
legal personality. Japanese law provides for Civil Code
partnerships, which have no legal personality, and Commercial Code
partnership corporations which have full corporate personhood but otherwise
function similarly to partnerships. The two main consequences of allowing
separate personality are that one partnership will be able to become a
partner in another partnership in the same way that a registered company can,
and a partnership will not be bound by the doctrine of ultra vires but will
have unlimited legal capacity like any other natural person.
See also Investment clubs
Types of business entity References
^ Sullivan, arthur; Steven M. Sheffrin. Economics: Principles in action. Upper
Saddle River, New Jersey 07458: Pearson Prentice Hall. p. 190. ISBN
0-13-063085-3. DeMott, Deborah A. “Transatlantic
Perspectives on Partnership Law: Risk and Instability”, 26 Journal of
Corporation Law. 879-895.[2]