Partnerships
Definition s1 Partnership Act 1890: “Partnership is the relation which subsists:
Between persons
Carrying on a business in common.
With a view of profit”
A partnership is created when the definition is satisfied. There are no further
formalities required.
“Business”
s45 PA 1890: “Business” “includes every trade, occupation or profession”
Virtually any activity of a commercial nature is capable of giving rise to a
partnership.
Must be more than “mere agreement” Illot v Williams & Others [2013] EWCA
Civ 645
No requirement that the parties have actually commenced trading :
“There is no rule of law that the parties to a joint venture do not become
partners until actual trading commences. The rule is that persons who
agree to carry on a business activity as a joint venture do not become
partners until they actually embark on the activity in question” - Khan v
Miah [2000] 1 WLR 2123.
In that case a partnership was held to exist where the parties had
agreed to open a restaurant together and taken steps pursuant to this,
including opening a joint bank account, obtaining a bank loan, and
acquiring premises, furniture and equipment.
“In Common”:
i.e. there must be two or more people who share responsibility for the
business and for decisions which affect the business.
Contrast this with an employer/employee relationship where the
employee must accept the decisions and instructions of his employer.
A partnership can be formed by two or more companies.
“View of Profit”:
The purpose must be to make money.
Charitable motives are unable to constitute partnerships.
Characteristics 1. To be involved in making decisions which affect the business (s24(5)).
Indicative of a 2. To share in the profits of the business; (s2(3) provides that this will be prima facie
Partnership evidence that an individual is a partner (s24(1)).
3. To examine the accounts of the business;
4. To insist on openness and honesty from fellow partners;
5. To veto the introduction of a new partner; and (s24(7)).
6. Responsibility for sharing any losses made by the business (s24(1)).
Decision By a majority vote (s24(8)).
Making However a decision to change the nature of the partnership business can only be
done unanimously (s24(8)).
New partners can only be introduced with the consent of all existing partners (s24(7)).
Definition s1 Partnership Act 1890: “Partnership is the relation which subsists:
Between persons
Carrying on a business in common.
With a view of profit”
A partnership is created when the definition is satisfied. There are no further
formalities required.
“Business”
s45 PA 1890: “Business” “includes every trade, occupation or profession”
Virtually any activity of a commercial nature is capable of giving rise to a
partnership.
Must be more than “mere agreement” Illot v Williams & Others [2013] EWCA
Civ 645
No requirement that the parties have actually commenced trading :
“There is no rule of law that the parties to a joint venture do not become
partners until actual trading commences. The rule is that persons who
agree to carry on a business activity as a joint venture do not become
partners until they actually embark on the activity in question” - Khan v
Miah [2000] 1 WLR 2123.
In that case a partnership was held to exist where the parties had
agreed to open a restaurant together and taken steps pursuant to this,
including opening a joint bank account, obtaining a bank loan, and
acquiring premises, furniture and equipment.
“In Common”:
i.e. there must be two or more people who share responsibility for the
business and for decisions which affect the business.
Contrast this with an employer/employee relationship where the
employee must accept the decisions and instructions of his employer.
A partnership can be formed by two or more companies.
“View of Profit”:
The purpose must be to make money.
Charitable motives are unable to constitute partnerships.
Characteristics 1. To be involved in making decisions which affect the business (s24(5)).
Indicative of a 2. To share in the profits of the business; (s2(3) provides that this will be prima facie
Partnership evidence that an individual is a partner (s24(1)).
3. To examine the accounts of the business;
4. To insist on openness and honesty from fellow partners;
5. To veto the introduction of a new partner; and (s24(7)).
6. Responsibility for sharing any losses made by the business (s24(1)).
Decision By a majority vote (s24(8)).
Making However a decision to change the nature of the partnership business can only be
done unanimously (s24(8)).
New partners can only be introduced with the consent of all existing partners (s24(7)).
