Intro to Partnership Law

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I. Sole proprietorships
Preferred choice for small-scale businesses that do not require much capital a. Exclusive control and management over business
b. Full liberty to make decisions, i.e. hiring, borrowing, etc c. Relatively easy to set up (low costs, minimal formality) d. Not a separate legal entity, therefore, owner’s business assets = personal property e. Unlimited liability

f. Restricted financing (own funds or own creditworthiness for loans)

II. Partnerships
Partnership Act: a relationship between two or more persons carrying on a business with a view to profit. Companies Act – more than 20 partners not allowed, unless professional partnerships. Characteristics similar to that of sole proprietorships, in addition: g. Each partner has equal managerial right and authority to act for the partnership h. Flexibility for partners to decide on internal management arrangement, i.e. can be shared, or divided into separate sections i. Each partner personally liable (including the possibility of losing personal property)

III. Companies and Limited Partnerships
To be discussed later

IV. Joint-ventures
Bears no technical meaning and has been vicariously referred to joint venture companies, partnerships and contractual arrangements.

* Before any person can carry on business, he has to apply for registration with the REGISTRY OF BUSINESS unless he is exempted (eg. professional partnerships).

* Two forms to be submitted:
1. Application for approval of the firm’s name – BRA s13 2. Application to register a business (incl. nature of business, partners’ particulars, etc.)

* Consequences of non-registration:
* Penal sanctions – BRA s27
* Prohibited from enforcing in court any contract in relation to the business * BUT, contract is still valid as TP rights against defaulter are not prejudiced
* The partnership relation is essentially based on a contract either expressly agreed upon or as inferred by law. * The Partnership Act (Cap. 391) intervenes by providing a default agreement spelling out how the business is to be run as well as the liabilities of the partners among others. * Informality of partnership relation: 1) no need for written documents spelling out details of responsibilities and obligations, 2) no necessity for formal meetings, etc. * Informality - a major cause of uncertainty / difficult to determine if a particular venture is a partnership.

Carrying on of a business

* S45 – business includes every trade, occupation, or profession. (includes, therefore not exhaustive). BUT excludes activities undertaken by an employee.

* Common ownership of property
* The mere observation than an occupation or activity generates income or profits does not ipso facto signify the conduct of business – PA s2(1). * If the property is used for the purposes of carrying on a business, it may be possible for the co-owners to be viewed as operating a partnership. * ESSENTIALY depends on the degree of activity and the mode in which the property has been dealt with.

* Carrying on existing business
* Cannot be a business that is still in contemplation regardless of agreement

* Remains a matter of construction
* In determining if a venture is a partnership:
* Partnership agreement generally helpful
* Conduct of parties (even if contrary to intention and agreement) * Inferences drawn from record of activities and surrounding circumstances

* Labels are at times reflective of parties’ subjective intention as to the nature of their relation, BUT, generally not regarded as conclusive indicators

Exceptions to the profit...
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