Information about partnership

Business law

Business organizations
Basic forms:
Sole proprietorship
Corporation
Partnership (General · Limited · LLP)
Cooperative
USA:
Business trust · LLC · LLLP Delaware corporation Nevada corporation
UK/Commonwealth:
Limited company (By shares · By guarantee) (Public · Proprietary)
Civil law countries:
AB · AG · ANS · A/S · GmbH
K.K. · N.V. · OY · S.A.
European Company Statute
Doctrines
Corporate governance
Limited liability · Ultra vires
Business judgment rule
De facto corporation and corporation by estoppel
Piercing the corporate veil
*Related areas of law*
Contract · Civil procedure

A partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which all have invested.

Civil Law

In civil law systems, a partnership is a nominate contract between individuals who, in a spirit of cooperation, agree to carry on an enterprise; contribute to it by combining property, knowledge or activities; and share its profit. Partners may have a partnership agreement, or declaration of partnership and in some jurisdictions such agreements may be registered and available for public inspection. In many countries, a partnership is also considered to be a legal entity, although different legal systems reach different conclusions on this point.

Germany

Main article: Kommanditgesellschaft

Partnerships may be formed in the legal forms of General Partnership (Offene Handelsgesellschaft, OHG) or Limited Partnership (Kommanditgesellschaft, KG).

In the OHG, all partners are fully liable for the partnership's debts, whereas in the KG there are general partners with unlimited liability and limited partners whose liability is restricted to their fixed contributions to the partnership. Although a partnership itself is not a legal entity, it may acquire rights and incur liabilities, acquire title to real estate and sue or be sued.

China

Main article: Partnership (China)

In mainland China, the a partnership enterprise encompasses general partnerships and limited liability partnerships.^[1] A general partnership comprises general partners who bear joint and several liabilities for the debts of the partnership enterprise.^[2] A limited liability partnership enterprise includes general partners and limited partners where the limited partners are liable only to the extent of their capital contributions.^[3]

Common Law

Partnerships are often favored over corporations for taxation purposes, as a partnership structure eliminates the dividend tax levied upon profits realized by the owners of a corporation.

The most basic form of partnership is a general partnership, in which all partners manage the business and are personally liable for its debts. Two other forms which have developed in most countries are the limited partnership (LP), in which certain "limited partners" relinquish their ability to manage the business in exchange for limited liability for the partnership's debts, and the limited liability partnership (LLP), in which all partners have some degree of limited liability.

There are two types of partners. General partners have an obligation of strict liability to third parties injured by the Partnership. General partners may have joint liability or joint and several liability depending upon circumstances. The liability of limited partners is limited to their investment in the partnership.

A silent partner is one who still shares in the profits and losses of the business, but who is uninvolved in its management, and/or whose association with the business is not publicly known.

Hong Kong

Main article: Partnership (Hong Kong)

A partnership in Hong Kong is a business entity formed by the Hong Kong Partnerships Ordinance, which defines a partnership as "the relation between persons carrying on a business in common with a view of profit" and is not a joint stock company or an incorporated company.^[4] If the business entity registers with the Registrar of Companies it takes the form of a limited partnership defined in the Limited Partnerships Ordinance.^[5] However, if this business entity fails to register with the Registrar of Companies, then it becomes a general partnership as a default.^[6]

Australia

Main article: Partnership (Australia)

Summarising s. 5 of the Partnership Act 1958 (Vic) (hereinafter the 'Act'), for a partnership in Australia to exist, four main criteria must be satisfied. They are:

Valid Agreement between the parties;
To carry on a business - this is defined in s.3 as 'any trade, occupation or profession';
In Common - meaning there must be some mutuality of rights, interests and obligations;
View to Profit - thus charitable organizations cannot be partnerships (charities are typically incorporated associations under Associations Incorporations Act 1981 (Vic))

United Kingdom limited partnership

Main article: Partnership (UK)

A limited partnership in the United Kingdom consists of:

one or more persons called general partners, who are liable for all debts and obligations of the firm; and
one or more persons called limited partners, who contribute a sum/sums of money as capital, or property valued at a stated amount. Limited partners are not liable for the debts and obligations of the firm beyond the amount contributed.

Limited partners may not:

draw out or receive back any part of their contributions to the partnership during its lifetime; or
take part in the management of the business or have power to bind the firm.

If they do, they become liable for all the debts and obligations of the firm up to the amount drawn out or received back or incurred while taking part in the management, as the case may be.

India

According to Indian Partnership act of 1932 ,Section 4 , " Partnership is defined as the relation between two or more persons who have agreed to share the profits of business run by all or any one of them acting for all ".

USA

Main article: Partnership (USA)

Main article: Partnership taxation (USA)

The federal government of the United States does not have specific statutory law governing the establishment of partnerships. Instead, the several composite states of the country each contain their own statutory and common law governance of partnerships. These states largely follow general common law principles of partnerships whether a general partnership, a limited partnership or a limited liability partnership. In the absence of appliable federal law, the National Conference of Commissioners on Uniform State Laws has issued non-binding models laws (called uniform act) in which to encourage the adoption of uniformity of partnership law into the states by their respective legislatures. This includes the Uniform Partnership Act and the Uniform Limited Partnership Act. Although the federal government does not have specific statutory law for establishing partnerships, it has an extensive and hyperdetailed statutory scheme for the taxation of partnerships in the Internal Revenue Code. The IRC is Title 26 of the United States Code wherein Subchapter K of Chapter 1 creates tax consequences of such great scale and scope that it effective serves as a federal statutory scheme for governing partnerships.

Notes

1. ^ Partnership Enterprise Law, Chapter 1, article2
2. ^ Partnership Enterprise Law, Chapter 1, article2
3. ^ Partnership Enterprise Law, Chapter 1, article2
4. ^ Hong Kong Partnerships Ordinance, Chapter 38, section 3
5. ^ Hong Kong Limited Partnerships Ordinance, Chapter 37, section 4
6. ^ Hong Kong Limited Partnerships Ordinance, Chapter 37, section 4