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Partnerships - Definition
Partnership is defined as 'the relation which subsists
between persons carrying on a business in common
with a view of profit'. A partnership is not a separate legal
person distinct from its members, it is merely a
'relation' between persons. Each partner (there must be at
least two) is personally liable for all the debts of the firm.
Partnership is a common form of business association. It is
flexible, because it can either be a formal or informal
arrangement, so can be used for large organisations or
a small husband-and-wife operation.
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The relation which subsists between
persons
• 'Person' includes a corporation such as a registered
company as well as an individual living person.
• There must be at least two partners. If, therefore, two
people are in partnership, one dies
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Carrying on a business
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In common
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A view of profit
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Liability of the partners
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Limited partnership
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Events causing termination
• The Partnership Act 1890 states that partnership is
terminated in the following instances.
Passing of time, if the partnership was entered into for a
fixed term
Termination of the venture, if entered into for a single
venture
The death or bankruptcy of a partner (partnership
agreement may vary this)
Subsequent illegality
Notice given by a partner, if it is a partnership of
indefinite duration
Order of the court granted to a partner
Agreement between the partners
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Liability of partners in an unlimited
liability partnership
• Partners are jointly liable for all partnership debts
that result from contracts made by other partners
which bind the firm. The Civil Liability Act 1978
provides that judgement against one partner does
not prevent subsequent actions against other partners.
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Formation
• A limited liability partnership may be formed by persons
associating to carry on lawful business with a view to
profit, but it must be incorporated to be recognised.
LLPs can have an unlimited number of partners. To
be incorporated, the subscribers must send an
incorporation document and a statement of
compliance to the Registrar of Companies
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Limited partnership
• The other form of partnership that is seen, rarely, in the
UK is the limited partnership. Under the Limited
Partnership Act 1907, a partnership may be formed in
which at least one partner (the general partner) must have
full, unlimited liability. The other partners have limited
liability for the debts of the partnership beyond the
extent of the capital they have contributed.
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