182 learning objectives at the end of this chapter

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18.2 LEARNING OBJECTIVES At the end of this chapter, the reader should clearly understand: • The meaning and nature of partnerships • The nature of a general partnership and its characteristics The relative advantages and disadvantages of doing business as a general partnership • The nature of limited partnerships and it characteristics and limitations • The nature and characteristics of limited liability partnerships • The relative advantages and disadvantages of limited liability partnerships Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 334 PARTNERSHIPS 18.3 THE GENERAL PARTNERSHIP The general partnership is the traditional or ordinary form of partnership with others being later modifications of, or departures from, it. Unless otherwise indicated, a partnership would be a general partnership; and unless otherwise excluded by partnership agreement, the provisions of the Partnership Act (PA) 1890 govern general partnerships. However, as observed by Lord Millet in Khan v Mia and others [2000] 1 WLR 2123, the provision of the Act are not statutory presumptions but default provisions; very slight evidence would be required to exclude their application. S.1 (1) PA 1890 defines a partnership as “the relation which subsists between persons carrying on a business in common with a view of profit.” A general partnership is therefore an unincorporated business organization formed by two or more persons for a common undertaking in order to make profit. This implies that non-profit undertakings may not be formed as partnerships. Persons in a partnership are collectively called “a firm”, and the name under which they do business is referred to as the “firm name” ( s. 4 PA 1890 ). 18.3.1 DETERMINING WHETHER A PARTNERSHIP EXISTS It must be noted that somebody would not be considered a partner merely because he is a joint owner of property or receives payment or remuneration (regular or irregular) from a business as a servant, agent or beneficiary of a deceased partner. In addition, although the receipt of a share of the profits of a business may be evidence of partnership, such a receipt by itself does not make a person a partner – s. 2 PA 1890. However, if some form of agreement is in place and business activities have commenced, a partnership may be deemed to have commenced even if actual trading had not started and even if a formal partnership agreement had not been drawn up. Whether a partnership as contemplated by s.1(1) PA 1890 exists, in that the parties are carrying on business in common with a view to profit , is a question of fact depending on the circumstances of the case. The description given by the parties to their association is not conclusive. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 335 PARTNERSHIPS In Stekel v Ellice [1973] 1 WLR 191 , the claimant joined the defendant’s accountancy firm as a “salaried partner” with the agreement that he would become a full partner in seven months under a full agreement to be drawn up. This agreement was never drawn
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