The Partnership Act 1890 - General Partnerships

A partnership is established whenever two or more people set up

in business together with the intention of sharing profits and

losses and do not form either a limited company or a Limited

Liability Partnership (LLP). Even if they do not intend to form a

partnership, if they enter into this type of relationship a

partnership is formed.

Partnerships formed under the Act are often unwieldy and can

lead to disputes between partners. For instance, under the default

provisions of the Act:

A partner is not obligated to participate in the running of the

business in any way, which means that they do not have to turn up

to work.

Partners receive an equal share of the profits of the business,

no matter how much time of effort they have put into it.

Partners cannot retire. If a partner dies or decides to leave

the partnership, the partnership must be dissolved, assets

distributed equally, and then a new partnership (or other business)

created. The process is by no means simple, and can be extremely

costly.

Partners cannot be expelled from a partnership.

However, many of these potential stumbling blocks can be removed

by entering into a Partnership Agreement or Deed. An arrangement of

this kind lets the partners specify the exact nature of their

entitlements and obligations, and can go a long way to helping to

ensure that the business runs smoothly in the future.

Unlike an LLP or a limited company, a partnership is not treated

as a separate legal entity, which means that each partner is

jointly liable for any debts of the partnership and is jointly and

severally liable for loss or damage arising from wrongful acts or

omissions of any partner. It has, however, the advantage that the

partners will...