Partnership – Its Nature, Purposes and Causes of Dissolution.

Partnership – Its Nature, Purposes and Causes of Dissolution.

Partnership – When a number of individual carry on a business is referred to as a partnership business. The law regulating the establishment and operations of partnership businesses is codified in the partnership Act, a partnership is defined as the relationship which subsists between persons carrying on a business in common with a view of profit section 1 (2) of the Act excludes the relation between numbers of any company or association which is registered as a company under the companies Act or any other Act of parliament relating to the registration of joint Stock Companies.

However, the Act adopts objective criteria for determining the existence of partnership. Under section 2(1), joint tenancy, joint property or part ownership does not of itself create a partnership. Under section 2(2), the sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or fro the use of which the returns are derived. Under section 2(3) of the 1890 Act however, the receipt by a person of a share of profits of a business is prima face evidence that he is a partner in the business, but the receipt of such a share, or of a payment contingent on or varying with the profit of a business does not of itself make him a partner in the business.

Consequently the Act Recognizes Particular Instance in which this Departure Applies.

(1) Under  Section 2(3) (a), the receipt by a person of a debt or other liquidity sum out of the profit of a business does not of itself make him a partner in the business or liable as such.

(ii) Also under section 2(3) ©, a person being the widow or child of a deceased partner and receiving by way of annuity a portion of the profits made in the business in which the deceased person was a partner is not by reason of such receipt a partner in the business or liable as such.

(iii) Section 2(3) deals with a situation where can outsider lent money to the partnership or to one of the partners to the effect that the lender shall be paid a rate of interest which varies with the profit of the partnership, that he shall receive a share of the profit arising from carrying on the business. Such an agreement does not make the lender a partner in the firm provided that the contract is in writing, and signed by or on behalf of all the partner there to.

(iv) In section 2(3), a person who received by way of annuity, a portion of the profit of the business  as consideration of the sale by him of the goodwill of the business, is not considered to be a partner or liable as such. This also applied, where a partner in a partnership decides to withdraw from the firm and receives an annuity in consideration of his goodwill left in the partnership firm. Partnership is a conception of law, and the count can decide that a partnership exists even when the parties never planned or intended to establish one. According to section 5 of the English partnership Act of 1890, a partnership business exists where:

(1) Every partner is an agent of the firm and his co- partners for the purpose of the business of the firm.

(2) Each general partner is liable jointly with the other partners for the whole of the partnership debts incurred while he is a partner.

(3) The Ultimate objective of the business is the acquisition of profit or gain although losses may, of course, result, but both are shared in such proportion as may be agreed.

(4) Some or all the Partners contribute money, or its equivalent, for use in the partnership business irrespective of whether these contributions are equal or not.

Further Explanation Of Partnership From Various Source – Wikipedia.

Partnership is a strategic alliance or relationship between two or more people. Partnership is an arrangement where entities and/ or individuals agreed to co-operate to advance them interest. In the most frequencies instance a partnership is formed between one or more business in which partners (Owners) co- labour to adverse and share profits or losses

Partnerships are also frequent regardless of and among sectors. Non – profit organization for example may partner together to increase  the like hold of each achieving their mission. Government, may partner with other government to achieve their mutual goal, as may religions and political organization. In education accrediting agencies increasingly evaluate schools by the level and quality of their partnership with other schools and across sectors. Partnership also occur at personal level such as when two or more individual agree to domicile together. Partnership between government, interest based organizations, schools, business and individual or some combination thereof, have always been and remain common place.

Partnerships have widely varying result and can present partners with special challenges, levels of give and – take areas of responsibility. Line of authority and overarching goals of the partnership must all be negotiated while partnerships stand to amplity mutual interests and success, some are considered ethically problematic or at least debatable. When a politician, for example, partners with a corporation to advance the corporation’s interest may make the partnership problematic from the stand point of the public good. Developed countries often strongly regulate certain partnerships via anti-trust laws, so as to innibic monopolistic practices and foster free market competition.

Among developed countries, business partnerships are often favored over corporation in taxation policy since divided taxes only occur on Profit before they are distributed to the partners. However, structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as share holders of a corporation.

Partnership in China

In mainland china, a partnership enterprise econcomprise two type of partnerships general and limited partnerships.

General and limited partnerships

1) General Partnerships Comprises general partners who bear joint and several liabilities for the debts of:-

a) The partnership enterprise, there is a special general partnership which can be employed by professional service providers such as accountant firms and law firm.

2) A Limited partnership enterprise includes general partners and limited partners are liable only to the extent of their capital contribution.

Under common law legal systems, the 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 in which certain limited partners relinquish their ability to manage the business in exchange for limited liability partnership (CLP) in which all partner have some degree of limited liability. There are two type of partners:-

General partner have an obligation of strict liability to third parties injured by the partnership. General partner may have joint and several liability depending upon circumstances. The liability of limited partners is limited to then investment in the partnership.

Partnership in Hong Kong

A partnership in Hong is a business entity formed by Hong Kong. Partnership ordinance which dyines partnership as “the relation between persons carrying on a business in common with a view of profit” end is not a joint stock company or an incorporated company. If the business entity registers with the Registrar of companies it takes the time of a limited partnership ordinance.

However, if this business entity fails to register with the Registrar of the companies, then it becomes a general partnership as a default.

United Kingdom Partnership Law and Nature.

A Limited Partnership Consists of:

1. One or more people called general partners, who are liable for all debts and obligations of the firm.

2. One or more people called limited partners who contributes a sum/ sum of money as a capital, or property valued at a stated amount. Limited partner are not liable for the debts and obligation of the firm beyond the amount contributed. Limited partners may not

(1) Draw out or receive back any part of their contribution to the partnership during it’s rejetime.

2) take part in the management of the business or have power to bind the firm. If they do, they because liable for the debts and obligation of the firm up to the amount draw out or receive back or incurred while taking part in the management as the case may be.

Partnership can also known as a relation which subsists between persons who have agreed to combine their property, labour, skill in some business and to share the profits there of between them. It is also a strategic alliance or relationship between two or more people. Partnership also an incorporated business organization.

Limitations in the Number of Partners in a Partnership Business.

In the case of a partnership business, the number of partners is limited to a minimum of two and a maximum of twenty; with the exception that numbers within each of the under mentioned groups may form partnerships of more than twenty persons.

1. Practicing solicitors provided each partner is a solicitor of the supreme court.

2. Members of a recognized stock Exchange provided each partner is a member of that exchange.

3. Other groups who obtain approval under regulations made by the Board of Trade.

Kinds of Partner

(1) General Partners:- according to the partnership Act of 1890, has full power of participation in business. His liability on partnership dept and obligations is to the full extent of his personal estate.

(2) Sleeping Partner:- the term “ sleeping” or “ Dormant partner is applied to a partner who takes no achieve Participation in the business, but retains his capital therein and probably has a reduced share of the profits. The liability of a partner for the firm’s debts is the same whether he is dormant or achieve.

(3) Limited Partner:- is a person or body corporate who shall, at the time of entering into such partnership, contribute thereto a sum as capital or properly valued at a stated amount who shall not be liable for the debts of obligations of the firm beyond the amount so contributed.

Limited Partnership

This is defined by the limited partnership Act of 1907 as one which must consist of one or more person called General partners, who shall be liable for all the debts and obligations of the firm, and one or more persons to be called limited partners, who shall not be liable for the debts and obligations of the firm beyond the amount so contribute.

A limited partnership must be duly registered with the Registrar of companies or with the corporate Affair commission in Nigeria, otherwise it will be regarded as an ordinary partnership. Registration requires disclosure of the following particulars among within

1) The firm’s name

2) The general nature of the business

3) The term of the partnership

4) The full names of each of the partners.

5) A statement that the partnership is limited

Partnership Agreement

The essence of partnership is mutual agreement it is desirable for the partners to come to some understanding before entering into partnership as to the condition upon which the business is to be carried on, and as to their respective rights and powers. The advantages of a written agreement need no emphasis, and it is preferable that it should be under seal, since the character of a deed precludes contradiction by any party to the term which have been agreed. Such an agreement must cover clauses relating to accounts in partnership, as to:

1) Capital: – whether each partner should contribute a fixed amount or otherwise.

2) The division of profit and losses between the partners, including capital profits and loss

3) Whether current account (If any) are to bear interest and it so at what rate.

4) Whether partners’ drawing are to be limited in Amount

5) The method by which the valued of goodwill shall be determined in the event of retirement or death of any of the partners.

6) In the event of there being any partnership insurance policies, the method of treating the premiums thereon and the division of the policy money.

Rights and Duties of Partners in the Absence of any Agreement

In the absence of express agreement between the partners relating to their interests on partnership properly rights and duties, then the

1) Partners contribute capital equally and also share profits and losses equally.

2) No Partner should be entitled to any interest on his share of capital unless the partnership profit is first ascertained.

3) All expenditures properly incurred by any of the partner on behalf of the partnership business must be repaid to the partner.

4) No Person may be admitted into the partnership business without the consent of the existing partners.

The Duties of a Partner

(1) To act with utmost good faith in his relations with his co-partners.

(2) To render true account and full information of all thins affecting the partnership to any partner or his legal representatives.

(3) To refrain from competing with the firm. Where a partner, without the consent of his co-partners, carries on a competing business, he must account for and pay over to the firm all profit made by him in that business.

(4) to account to the firm for any benefit derived by him without the consent of the other partners from any transaction concerning the partnership, or from any use by him of the partnership property, name or business connections.

What Are the Cause of Dissolution of Partnership

Partnership may be dissolved for the following reasons:-

(1) By the death of a partner

(2) By the express will of all the partner who have not assigned their interest or suffered their to be charged for their separated debts, either before or after the termination any specified term or particular undertaking.

(3) By the bankruptcy of any partner of the partnership.

(4) By decree of court under section 358, 320.

(5) Prolonged illness or incapacitation of a partners

(6) By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership


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One Comment on “Partnership – Its Nature, Purposes and Causes of Dissolution.”

  1. khamis maulid says:

    what procedure we may follow if one partner become insolvent and we need to admit the other?

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