In the commercial and legal parlance of most countries, a general partnership or simply a 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

Characteristics

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 ("transferable interest"). A partner's judgment creditor may obtain an order charging the partner's "transferable interest" to satisfy a judgment.

Separate legal personality

In the United States, section 201 of the Revised Uniform Partnership Act (RUPA) of 1994 provides that "A partnership is an entity distinct from its partners."

In England & Wales, a partnership does not have separate legal personality; although the English & Welsh Law Commission in Report 283 proposed to amend the law to create separate personality for all general partnerships, the British government has decided not to implement the proposals relating to general partnerships. The Law Commission's proposal to confer separate legal status on limited partnerships will be taken forward In Scotland partnerships do have some degree of legal personality. The Limited Liability Partnerships Act 2000 confers separate personality on LLPs.

While France, Luxembourg, Norway, the Czech Republic and Sweden also grant some degree of legal personality to commercial partnerships, other countries such as Belgium, Germany, 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 ordinary 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 , which have no legal personality, and Commercial Code 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 (listed by country)

References

For partnership in cricket terminology, see List of cricket terms

Definition in Civil Law

For a country-by-country listing of types of partnerships, companies, etc., see Types of business entity.

Germany

Partnerships may be formed .. in the legal forms of General Partnership (Offene Handelsgesellschaft, OHG) or Limited Partnership (Kommanditgesellschaft, KG). A partnership can be formed by 2 or more people.

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

In mainland China, the a partnership enterprise encompasses general partnerships and limited liability partnerships. A general partnership comprises general partners who bear joint and several liabilities for the debts of the partnership enterprise. 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.

Japan

The Japanese civil code provides for partnerships by contract, which are commonly known as or "voluntary partnerships." A more recent statute has allowed for the creation of limited liability partnerships.

One form of partnership unique to Japan is the tokumei kumiai or "anonymous partnership," in which partners have limited liability so long as they remain anonymous in their capacity as partners and do not participate in the operation of the partnership. Japanese corporate law also provides for partnership-like corporations called mochibun kaisha.

Common Law

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

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. If the business entity registers with the Registrar of Companies it takes the form of a limited partnership defined in the Limited Partnerships Ordinance. However, if this business entity fails to register with the Registrar of Companies, then it becomes a general partnership as a default.

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

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 section 4 of the Indian Partnership Act of 1932, "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". This definition superseded the previous definition given in section 239 of Indian Contract Act 1872 as - “Partnership is the relation which subsists between persons who have agreed to combine their property, labour, skill in some business, and to share the profits thereof between them”. The 1932 definition added the concept of mutual agency.

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 applicable 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.

Islamic Law

The Qirad and Mudaraba institutions in Islamic law and economic jurisprudence were the precursors to the modern limited partnership. These were developed in the medieval Islamic world, when Islamic economics flourished and when early trading companies, big businesses, contracts, bills of exchange and long-distance international trade were established.

In medieval Italy, the Qirad and Mudaraba concepts were adapted in the 10th century as the commenda, a limited partnership instiution which was generally used for financing maritime trade.

Notes

See also

• Business partnering
• General partnership
• Limited partnership
• Limited liability partnership (LLP)
• Equity partner
• Partnering
• Partnership taxation
• Partnership accounting
• Strategic Alliance
• Corporation
• Types of business entity