A general partnership requires two or more persons working together to carry on business with a view to profit. This structure occurs as a matter of law. You do not need to see a lawyer to create a partnership, but it recommended that you seek legal advice. Many important aspects of the relationship between partners is not dealt with in law and should be addressed in a partnership agreement. Examples of matters to be covered in a partnership agreement include the initial and ongoing capital contributions of partners, the manner in which partner distributions are to made and the admission of new partners.
No separate identity — The business is not a legal entity separate from the partners. Each partner is responsible for completing all of the business’ obligations, whether or not that partner was involved in the acceptance of the partnership.
Liability — If legal action is brought against the business, each partners’ personal assets may be liable to seizure. Each partner is responsible for illegal acts committed in the course of business by all partners and their employees. A creditor can seek payment from one partner to the exclusion of others.
Employment —A partner cannot be an employee of the business.
Income Tax —Generally, the income or loss of the business is allocated among the partners in accordance with the Partnership Act or, if applicable, the partnership agreement. The allocation is then included in each partner’s personal tax return.
In addition to general partnerships, limited partnerships and limited liability partnerships can also be created. These types of partnerships provide creative business structuring options. Both result in reduced partner liability and the former is a tool for investors who do not want to become involved in running the business. Contact us to find out more details about these forms of business organization and whether they may be appropriate for your business.
The information provided on this website is merely an informative guide and should not be relied upon for legal advice. It is intended to provide general information only. It is recommended that you see a lawyer about your particular legal situation and request legal advice.