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PARTNERSHIPS

 

A partnership is created when two or more people decide to carry on a business with the expectation of making money. A partnership can easily be formed by a simple verbal agreement or written agreement between two or more people. Such an agreement creates a legally binding contract.  In Ontario there are three specific pieces of legislation that deal with partnerships - the Partnership Act, the Partnership Registration Act and the Limited Partnership Act. It is beyond the scope of this course to cover all the legal issues that relate to partnerships.  What follows is a general discussion on the distinctiveness of the partnership as a form of business organization.

Limited Life

 

When a partnership is formed it has a limited life (the partnership must end at sometime in the future).  The partnership will cease to exist when one of the following events occur:

  partner leaves the partnership

 partner becomes bankrupt

 new partner is admitted

 partner dies

 reaching the time period or event specified in the partnership agreement

 

Mutual Agency and Unlimited Liability

 

Mutual Agency means that each partner can act as an agent for the partnership.  This means that each partner can enter the partnership into contracts for the purchase of goods and or services that are in the normal scope of the business. Unlimited Liability means that each partner is personally responsible for the for all the debts of the business.  It is therefore important that you can trust your partner to make sound business decisions or you could find yourself having to pay for their bad decision.