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NATURE OF PARTNERSHIP
NATURE OF HYPERLINK http://www.austlii.edu.au/au/legis/act/consol_act/pa1963154/s6.html l partnership PARTNERSHIP
Partnership is formed when two or more people with common goal come together to mutually form an organization. The members mutually become partner and the relation is called the partnership. The major aim of two or more people coming together to form a partnership is to make profits for the members. Partnership can be classified in various categories depending on the nature and the type of the partners that formed it. There are limited and incorporated unlimited partnerships. Members in a partnership are governed by either the partnership act or deed and that depends on the members agreement. The act or deed is binding to the members who formed the partnership.
Just like any of the organization that exists, partnership too has rules that determine its existences and such provision are provided in the partnership Act or deed. Partnership agreement is binding to members who mutually consent to the partnership Act or deed. Therefore, joint tenancy, tenancy in common, partial ownership of property, and joint ownership of property does not in any way create a partnership unless there is a mutual agreement among members with a common view. Further, sharing of profits or gross returns does not guarantee an individual to be called a partner unless he subscribes to the partnership Act or deed. Nevertheless, a receipt by an individual of share of the profits of the business is attributed as the evidence of being a partner in that business, but such receipt of contingent payment on or share varying with the returns of the business, cannot, of itself guarantee the person a partner with respect to the business in question unless he mutually consent to the partnership Act.
Other specific conditions that do not guarantee a person an automatic membership are; the receipt by an individual of debt instrument or other liquidated demands by installments a lone from the accruing profits of the partnership does not qualified the person to be a partner. A contract for remuneration of an employee or an agent that is engaged in the business by share of business profits does not in itself makes that person to be partner. A child, spouse of a deceased partner does not become a partner by merely receiving periodical payments or profits of the deceased. Subsequently, lending of money to a person who is engage in the business under contract, or is about to join the partnership whether in writing with that person and signed on behalf of all members making the lender a beneficiary of the business interest, share or profit is not used as membership to the partnership. Finally, a person who receives by way of periodical payments part of the business profits in connection with the sale by the person of goodwill of the business is not by that standard a member of the partnership. However, the above restriction is not applicable in the incorporated limited partnership.
PART 2RELATIONS OF PARTNERS TO PERSONS DEALING WITH THEM
Any partner in a business a part from an incorporated limited partnership, act as an agent of the business and their act is deemed to be binding to all members whether done as an in individual or collectively as partners for the purpose of the business. An act done by such partners binds the business and other partners unless; the partner who carried the act does not have the outright authority to act on behalf of the firm in that issue in question or the person with whom the partner is dealing with expressly knows that the partner in question does not have the authority to act on that particular matter. In an incorporated limited partnership, the general partner is the agent of the business an he is task with the day to day running of the business. An act done by general partner(s) is binding to all members and the business too unless, the general partner who does the act has no authority to carries such activities or the person whom he is dealing with is expressly aware that the partner lack the authority to carry such activities.
An act relating to the business of the firm apart from incorporated limited partnership is binding on the firm plus all the partners if the Act is executed by an authorized person who has the capability to act or execute the partnership documents. The Act is binding whether or not the partners uses the business name or shows intent to bind the firm. An Act of incorporated limited partnership subjects to members liabilities binds all the partners when it is executed by an authorized partner by either using the business name or any way that show an intention to bind the members. However, the provision does not affect a rule of law pertaining the execution of negotiable instruments or deeds. If a partner in the business other than an incorporated limited partnership pledges the credit of the partnership for reasons that are not connected to the partnership, then the business or partners will not be bound to such activities unless the partners is authorized by the partnership deed or Act. In an incorporated limited partnership, when a general partner pledges the credit of the partnership for reasons that are not connected to the business, such activities does not either binds the business or partners in general. The liability incurred by unauthorized partner does not bind the business or members of the partnership. A partner that commits such an act without authority takes personal liability.
Other than incorporated limited partnership, each partner in a business is jointly liable with other members for the business obligations and debts that are incurred when the member is a partner. Interestingly, there are cases of individual partner that occurs when one of the partners dies and he is not replaced. In that situation, the deceaseds estate becomes liable and is used to pay any debt that accrued when the deceased was alive. For corporate limited partnership, each partner is jointly liable for the business obligations and debts incurred when the general partner is an general partner and has the authority to act on behalf of the firm. Treatment of individual general partner after the death of one general partner is the same as other form of partnership. Nevertheless, a general partner in an incorporated limited partnership is only liable for the obligations and debts of the business to an extent that the partner in question cannot clear the debts and obligation or when it is provided in the partnership agreement.
When a partner does something wrong that injures the third party through an act of omission or commission during the course of the business activity, then the partnership business is held liable for such an act done by its member. When a partner in an incorporated limited partnership does act in a wrongful way through an act of omission or commission in his course of carrying out the business duty then the partnership is liable for the loss course to the third party. However, this is only possible when the partner who has committed the act is a relevant partner and has the authority to act on behalf of the firm. More so, a general partner in an incorporated limited partnership that acts as the company director or any recognized body within the companys ranks commits wrongful act as a member territory authority is taken to act in the ordinary course of the business, hence is individually liable for the Act of omission. When a partner in a firm other than an incorporated limited partnership, acting within the partnership scope, receives another persons property or money that are not partner and subsequently misappropriate such monies or property under the company custodys , the company is held liable. An act of a general partner in an incorporated limited partnership is binding to the company. When a general partner acting within the companys scope, receives none members property or money and misappropriate those items while still within the companys custody, the said partners are held liable for their act of omission.
Each and every partners in a partnership other than incorporated limited partnership, is jointly liable and severally for everything that the business becomes liable under partnership Act section 14 and 15 when he is a partners in that business. For in an incorporated limited partnership, members are jointly and severally liable for everything that the partner is liable under section 14A of the Partnership liability act. However, such liability are only applicable to the extent the member is unable to satisfy the liability or it is provided in the partnership a agreement.
In every partnership there are those who are liable for holding out. When an individual represent himself as one of the partner in the business through written, conduct or spoken and allows him-self to be represented in the company is individually liable for their act. Further, in cases where the business continue to use the a partners name after his death, then the continued use of such name of the deceased does not itself makes the person a legal representative of the deceased estate hence is liable for the debts incurred after the decease death . Moreover, such conditions applied only to all partnership excluding the incorporated limited partnership.
Any admission or representation made by the partner in a partnership other than incorporated limited partnership concerning the partnership affairs during the ordinary course of business is taken as evidence against the partnership while for incorporated limited partnership, an admission by a general partner regarding the firms a affairs is evidence against the partnership. A notice to a partner who acts in habitual manner in matters relating to business affairs is regarded as the business notice, unless that partner commits fraud within the course of duty. However, for incorporated limited partnership, such notice operates as the partnership notice, unless the general partner commits fraud. Member(s) that are admitted to the existing partnership other than an incorporated limited partnership are not liable for any for anything done before his admission while for incorporated limited partnership, an individual admitted as general partner is not liable to anything done prior to his admission by mere admission only. Retirement from the business does not prevent a member from the business liabilities incurred when he was still a member. Nevertheless, a retiring member may be discharge from the existing liabilities through a mutual agreement among the members. A change in the firms constitution can lead to revocation of the transaction that was pegged on that constitution; however, this does not apply to incorporated limited partnership.
PART 3RELATIONS OF PARTNERS TO ONE ANOTHER
In every partnership, members rights and duties are either mutually expressed or inferred from the course of dealing with another. Partnership property Act section 25 defines partnership property as; all property, interests, and rights in property that were originally brought to the firm as stock hence are held and applied exclusively by members for firms purposes, however, this is only applicable to incorporated limited partnership. For an incorporated limited partnership, the Partnership property Act states that all property, rights, and interests acquired either through purchase, or any way that the business allows is applied by the partnership exclusively for the running of the business. Partner(s) in an incorporated limited partnership does not have a legal interest in the business property.
When a land is bought by a co-owner of the partnership, and subsequently makes a profit out of the deal, then such profit from the land belongs to the partnership and the estate too with or without an agreement belongs to the partnership for partnerships other than incorporated limited partnership; the same applied to property bought with the business money. When an estate or interest in land becomes partnership property, then the interests and estate is treated as between the partners unless, stated otherwise upon the administration of the deceased estate, however, this is not applied in an incorporated limited partnership.
The partnership Act further, states that all partners in a business are entitled to share profits and capital equally hence are liable to contribute equally when the business makes any loss. The business shall indemnify each partner for any loss that a member may incur with regards to personal liabilities or payment made during the ordinary course of the business, however, the activity should taken for the preservation of the business property. Any member who makes advance payment or payment above the subscribe capital, is entitled to receive an interest rate of 7% per annum effective from when the payment was made. Notably, partners are not entitled to receive profits before such profits are ascertained from the capital subscribed. Every partner is required to take an active role in the day-day running of the business. A partner is not guaranteed any remuneration for acting in the business. The Act expressly states that; no partner shall be introduced to the partnership without the consent of existing members, any difference a rising from the ordinary course of the business should be decided by majority members through a vote, members are free to inspect the books of account during the business working days, and members operation within the firm are based on mutual consent of the members, unfortunately, those rules does not apply in an incorporated limited partnership.
A partner can be expel from the partnership by the majority members who acts in accordance with the powers conferred to them by the partnership Act and that is done when the member violets the partnership spirit or act contrary to the partnership requirement. A fixed retirement period can also force a partner to relinquish his or her position from the partnership. Partners are not allowed to carry out any businesses that compete either directly or indirectly with the partnership business without the partnership consent, and if he or she does so then, the profits that accrued shall be channel to the partnership; nonetheless, this does not apply to an incorporated limited partnership. An assignment by a partner in a business regarding the partners share, whether absolute, by mortgage, or redeemable charge does not entitled the assignee during the continuance of the partnership to interfere with the management of the partnership affairs or acquire and inspect partnerships books of account. The assignee is only entitled to profits of the partnership, during the partnership dissolution, the assignee is entitled to the share he or she contributed to the partnership.
PART 4DISSOLUTION OF HYPERLINK http://www.austlii.edu.au/au/legis/act/consol_act/pa1963154/s6.html l partnership PARTNERSHIP AND ITS CONSEQUENCES
Subjects to the partnership agreement, the partnership can be dissolved after; meeting its target goal, when it has reached the expiry period, or when members mutually agree to dissolved that partnership in case the time frame is indefinite. More so a partnership can be dissolved under the following conditions; when a member is declared bankrupt as per the Bankruptcy Act 1966 of the Commonwealth, a death of a member may course the partnership to be dissolved. Unlawful activities can prompt the state to close the partnership or a situation where the activities of the partnership are declared unlawful then members are required to dissolve it. The Supreme Court also has the power to dissolve any partnership business under the following circumstances; when a partner is declared mentally unfit to carry business activity, when a partner in a given business becomes permanently incapacitated hence cannot perfume his or her duties, when one or some of the partners becomes guilty of court order, a partner willfully breaches partnership a agreement, when the business consistently and persistently makes losses, and when situation arises that in the court opinion guarantee partnership dissolution
The partnership Act defines rights of a person who deals with a firm after the change in the business constitution. Any person that deals with the partnership after the change of constitution is required to treat all the old members as active members of the business. A member is not liable for any contract that is made after his or her retirement. Under the Bankruptcy Act 1966, when a partner becomes bankrupt, or dies, the estate of that partner is not liable for the partnership debts incurred after the date of bankruptcy or death of the partner.
Each member of the partnership has a right to be notified during disillusion. The notification can be done publicly to notify members after a mutual agreement has been reached. Any change of the date of dissolution must be publicly advertised to notify the members of such changes. During dissolution, members are entitled to the reminder of the partnership property after offsetting external debts and liabilities, however, such payment are made as per the members share contribution. Under subsection 1 of the partnership Act, a representative of the partner can apply to the Supreme Court to wind up the business after the termination of the partnership. In a case where the partnership is prematurely dissolved, where a partner paid a premium to another partner on entering, the affected partner can apply to the Supreme Court so that he or she gets back the premium depending on the terms of agreement and period of the accrued premium. However, when the partnership is dissolved due to fraud or misrepresentation, the parties to that case are entitled to the right of; a lien on, right of retention of the partnership surplus after settling the liabilities for the sum of money paid by the partner in question for the purchase of the share, the partner should pay the firms creditors for the sum of money he purchase, finally, should indemnify other partners from such act.
The outgoing partners rights are guaranteed under partnership Act subsection 2. When a partner of a firm dies or ceased to be a member, the continuing partners shall carry the business with members capital without making any settlement to that account between the business and the outgoing partner. Such partners are entitled to receive profits upon dissolution and further an interest rate of 7% premium per annum on his share capital. As per the partnership a agreement, the amount due from the continuing partner to the outgoing partner, or a representative of a deceased partner with regard to the outgoing partners share is a debt accruing from at the date of disillusion or death. There are rules that govern the distribution of assets on final settlements of accounts. The rules are; the firm shall pay all the losses incurred and any accruing liability before making payments to the partnership. Members are paid after all internal and external liabilities have been settled.
PART 5INCORPORATED LIMITED PARTNERSHIPS
Division 5.1Nature and formation of incorporated limited HYPERLINK http://www.austlii.edu.au/au/legis/act/consol_act/pa1963154/s6.html l partnership partnerships
An incorporated limited partnership is a legal entity separates the members. The partnership has a legal personality that is separate from the partners with perpetual life. The business may have a common seal. Since its a legal entity, incorporated limited partnership can sue or be sued in its capacity. The partnership seal should be kept as per the partnership policies and can only be used in an authorized case. An incorporated limited partnership, must have at least one general partner, however, the number should not exceed twenty. There should be at least one partner with limited liability. Partnership Corporation can either have a general or limited partner hence a corporation can be limited or general partnership.
Before the formation of a corporation, there should be a partnership agreement that defines members relation within the business. The law requires a full time, written partnership agreement among the partners. The rights, interests, and duties of the partners are outlined in the partnership agreement. The agreement binds both the partners and the business and partners are required to comply with the agreement. Partnership Act subsection 3 allows an incorporated limited partnership in signing partnership agreement.
Division 5.2Registration of incorporated limited HYPERLINK http://www.austlii.edu.au/au/legis/act/consol_act/pa1963154/s6.html l partnership partnerships
Subsection (2) of the partnership Act provides circumstance under which a member can apply for registration of the partnership. The conditions are; the partnership is registered under the Venture Capital Act 2002, there are general partner who intends to apply for registration of the proposed incorporated limited partnership under Venture Capital Act 2002,the partnership is in a venture capital management, and the partners intends to meets the of Income Tax Assessment Act 1936 .
Application for registration of incorporated limited partnership are done to the commissioner for fair trading after meeting the legal requirement and must be signed by all the partners or the founders. Full name of the partnership, together with physical address of the partnership must be indicated during registration. Partners should include all their names plus their physical address in the list during registration of the partnership. Further, members should state whether he or she is a general or limited partner and their membership. The commissioner for fair trading, upon successful registration shall register the business. An incorporated limited partnership is registered by recording all the information of the application under section 58. The register can be kept in any form that the commissioner decides and shall be available for public inspection. The commissioner has the authority to correct any mistake or omission in the register
Division 5.3Powers of incorporated limited HYPERLINK http://www.austlii.edu.au/au/legis/act/consol_act/pa1963154/s6.html l partnership partnerships
Apart from the legal capacity and individual powers, incorporated limited partnerships have the power to carry the business, enter in contracts and acquire rights and liabilities, to create, confer, vary and cancel interests in the partnership, acquire , hold, and dispose a property, appoints agents and attorneys, form and participate in the formation of the company, and participate in partnership contracts. Unless provided under the agreement, an action of a general partner, employee or an agent acting on his or her capacity does not bind the limited partner. Since limited partner is not an agent of the business. However, a general partner act as an agent of the business and their act done during the course of the business is binding to all other general partners.
Division 5.4Liability and powers of limited partners
A limited partner does not have any liability regarding the liabilities of incorporated limited partnership. In case of any liabilities, the limited partners will not be individually liable to meet any liability that is beyond his capital share in the partnership. Limited partner does not take part in the day-day management of the partnership. The action of limited partners is outline in the agreement and the partner maybe partially liable to their act of omission to the third party. The different between the general partner and limited partners majorly depend on their role. General partners take part in the day to day management of the partnership while limited partners do not take part in the day to day management of the business. The action of a general partner is binding to all the general partners while an action of limited partner does not bind other partners.
Division 5.5Winding-up of incorporated limited HYPERLINK http://www.austlii.edu.au/au/legis/act/consol_act/pa1963154/s6.html l partnership partnership
a An incorporated limited partnership can be voluntary wounded up when members mutually agree to wind it up, or when the business has attained its goal. During the winding up, members are required to set an agreement on how to distribute and share the business assets. A supreme court can also force an incorporated limited partnership to wind up. The commissioner for fair trading may initiate the process of winding up the business if the business has failed to deliver on its goal or act contrary to the requirements of an incorporated limited partnership. A partner who feels aggrieved by the commissioners decision to issue certificate under section 78(2) can go to the Supreme Court for review of the decision and such application should be made within 28 days after the notification of the certificate. Section 78(2) provides the process of winding up.
The process of winding up a partnership should be done within 28 day, and must be finished as per the days given by the commissioner. The commissioner for fair trading appoints a liquidator that oversees the process of winding up within 10 days after the publication of the winding up. Costs of winding up are made out of the property of the business. The property of the partnership are treated as per the partnership agreement during winding up and are distributed as per the partners share contribution and any aggrieved partners can applied to the supreme court to stop the process. Winding up is declared as a matter of purpose of the Corporation Act section 5. The partnership must give a notice to the commissioner of fair trading within seven days after the resolution of winding up as per section 77(1) of voluntary winding up, the commissioner records receipt of the notice.
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