Legal Aspects in Tourism and Hospitality

Sole Proprietorship
A sole proprietorship, also known as the sole trader, individual entrepreneurship or
proprietorship is a type of enterprise that is owned and run by one person and in which
there is no legal distinction between the owner and the business entity.
The sole proprietorship is the simplest business form under which one can operate a
business. The sole proprietorship is not a legal entity. It simply refers to a person who
owns the business and is personally responsible for its debts.

The advantages of a sole proprietorship include:

 Owners can establish a sole proprietorship instantly, easily and inexpensively.
 Sole proprietorships carry little, if any, ongoing formalities.
 A sole proprietor need not pay unemployment tax on himself or herself
(although he or she must pay unemployment tax on employees).
 Owners may freely mix business or personal assets.

The disadvantages of a sole proprietorship include:

 Owners are subject to unlimited personal liability for the debts, losses and
liabilities of the business.
 Owners cannot raise capital by selling an interest in the business.
 Sole proprietorships rarely survive the death or incapacity of their owners and so
do not retain value.

The partnership is the relation between persons who have come under a contract to
share the profits of a business carried on by all or any of them individually acting on the
behalf of them. Persons who have entered into a partnership with one another are
called individually, “partners” and collectively a “firm”.

A. Types of partners
Active/ Actual/ Ostensible Partner
The partner of the firm acts as a representative of other partners for all the acts
carried out in the usual business lifecycle of the business. In the event of a
retirement of a partner, the person must give a public notice to absolve himself of
their liabilities for acts carried out by the other partners after his retirement.

Sleeping or Dormant Partner

 These partners share their profits and losses and are liable to third parties for the
business carried out by the partnership firm. However, they are not required to give
public notice of their retirement from the partnership firm.

Nominal Partner
A nominal partner is an individual who lends his name to the partnership form. When
this is done without having any real interest in the business, the person is a nominal
partner. This kind of a partner is not entitled to share the profits of the firm. This
partner has neither invested in the firm nor takes part in how the business is run at
the firm.

Partner in Profits only

This is a partner who is entitled to have a share of the profits without being liable to
the losses. This kind of a partner is liable to third parties only for acts of the gain.

Sub-Partner
A Sub-partner is a partner in a partnership firm who agrees to share his profits in a
partnership firm with an outsider to the firm. A sub-partner does not hold any right
against the firm nor is liable to any debts caused by the firm.

Incoming partners
This is a partner who is admitted as a partner into an already existing firm with the
consent from all the other existing partners. Such a partner is not liable for any acts
of the form taken before his entry as a partner to the firm.

Outgoing Partner
An outgoing partner is a partner who leaves the firm in which the rest of the partners
continue to carry on the business. Such a partner remains liable to third parties for
all the actions taken by the firm until a public notice concerning his retirement is
given.

B. Nature of partnership
The partnership is form agreement which two entities form to compile their resources to
invest in a business with an intention of sharing the profits incurred from the said
business. The partnership to its very sense ¡s meant to support sole proprietorship in
order to delimit the risk of limited capital and skills. In a partnership, the partners form
an agreement to manage the profits as well as losses.

C. Delectus Personae
 A Latin phrase where the right of one partner is to approve or disapprove or a new
partner.
This phrase, which literally signifies the choice of a person, is applied to show that
partners have the right to select their copartners; and that no set of partners can
take another person into the partnership, without the consent of each of the partners.

D. Essential elements of partnership

1. Relationship of at least two people
There must be no less than two people to frame a business firm. Every one of the
partners must be capable to contract. In this manner, if in a firm, the quantity of
partners is decreased to one, the firm is said to be broken down as the foremost
essential to form the partnership is to by creating a mutual agency of two or more
individuals.

2. Sharing of Profits
The principal target of a firm is to gain benefit. These benefits are shared among
partners in pre-chosen proportion. Notwithstanding, if no such apportion is chosen, it
will be viewed as that the partners have measured up to the proportion in benefit
sharing. On the off chance that a man doesn’t have a privilege to share benefits, he
cannot be called accomplice. Be that as it may, according to the assertion, an
accomplice may not be at risk to share the misfortunes.

3. Shared Agency
Shared Agency connection implies that the matter of the firm should be completed
by all or any of the partners. A Partner is the operator of the other accomplice and
along these lines can tie another accomplice by his demonstrations.