Partnership

Partnership, in law, term applied to an association of two or more people who have agreed to combine their labour, property, and skill, or some or all of them, for the purpose of engaging in lawful business and sharing profits and losses between them; in this definition the term business includes every trade, occupation, and profession. The parties forming such an association are known as partners. Partners may adopt a fictitious name or use a real family name which must be registered.

A partnership can be formed only by contract. Any number of people may contract to form a partnership, and firms of partners may enter into partnership with one another. New members may be admitted into an existing partnership only with the consent of all the partners. The agreement of partnership is generally for a definite period of time or for a limited project; if no duration is specified, it is said to be a partnership at will, and can be terminated at any time by any partner. By agreement of the members, a partnership may be dissolved or terminated and the terms of the partnership agreement modified at any time. Death or bankruptcy of a partner, the insanity or misconduct of a partner, and the end of the period fixed for the duration of the partnership also operate to terminate the partnership.

A partner acts as an agent of the firm in the conduct of its business. Authority to act depends not only on the express powers given to a partner by the partnership agreement, but also on the implied powers resulting from the partnership relation and the nature of the business conducted. In the case of a partnership formed to conduct a wholesale or retail business, for example, a partner has implied power to borrow money for trade purposes, to buy on cash or credit, to make contracts and negotiable instruments to hire employees, to pay debts and sell or mortgage property for that purpose, and to receive payment of debts owed the firm. A partner must, however, exercise the highest degree of good faith in all dealings with the other partners, devote time and attention to the partnership business, and must account to the other partners for any secret profits made in the conduct of the partnership business. The liability of a partner for partnership debts is unlimited, except when the partner is a limited one in a limited partnership (that is, where the liability for the company's debts and losses is limited), organized in accordance with the provisions of a statute permitting such limitation of liability. The partnership agreement may contain provision for dissolution or expulsion of a partner; the expulsion powers must be exercised in good faith. The death of a partner, unless the agreement provides otherwise, terminates the partnership.