PARTNERSHIPS | PARTNERSHIP ACT 1890
A partnership is where two or more persons are to run a business together and actually do so. The term
‘partnership’ therefore describes a relationship based on an agreement i.e. a contract. This agreement
may be oral or in writing, or even implied by conduct. However, it does not necessarily matter whether
the parties identify their agreement as a partnership, as a partnership is formed when the definition of
‘partnership under s1 of the Partnership Act 1890 (PA 1890) is satisfied.
S1 PA 1890
A partnership is the relation which exists between persons carrying on a business in common with
view to make profit
Khan v Miah 2000, the HL held a partnership had indeed commenced, despite the partnership breaking
down before a restaurant had even opened.
It is important to remember that there must be more than a mere agreement to engage in a partnership;
there must be the ‘carrying on a business in common’, which means that two or more persons share
responsibility for the business and for decisions that will affect the business – there must be more than
one proprietor.
A partnership may be creating in two ways:
1) For a specific pre-determined duration e.g. 3 years
2) So as to continue without reference to duration, known as a partnership at will
Partnerships do not only exist between people but can also exist between companies e.g. when
engaging in a joint venture.
Fundamental Characteristics of a Partnership
There are typical rights and responsibilities which are fundamental to the partnership:
a) The right to be involved in decision making which effects the business
b) The right to share in the profits of the business
c) The right to examine the accounts of the business
d) The right to insist on openness and honesty from fellow partners
e) The right to veto the introduction of a new partner
f) The responsibility for sharing any losses made by the business
Setting up a Partnership
Since a partnership is formed when a business arrangement falls within the definition of s1 PA 1890,
there are no specific requirements for setting up a partnership. However, a written agreement is
invaluable as evidence of the relationship and its terms. It is also useful to have a written agreement to
form a constitution to which the partners can refer to e.g. when resolving disputes and to avoid further
litigation.
A partnership is where two or more persons are to run a business together and actually do so. The term
‘partnership’ therefore describes a relationship based on an agreement i.e. a contract. This agreement
may be oral or in writing, or even implied by conduct. However, it does not necessarily matter whether
the parties identify their agreement as a partnership, as a partnership is formed when the definition of
‘partnership under s1 of the Partnership Act 1890 (PA 1890) is satisfied.
S1 PA 1890
A partnership is the relation which exists between persons carrying on a business in common with
view to make profit
Khan v Miah 2000, the HL held a partnership had indeed commenced, despite the partnership breaking
down before a restaurant had even opened.
It is important to remember that there must be more than a mere agreement to engage in a partnership;
there must be the ‘carrying on a business in common’, which means that two or more persons share
responsibility for the business and for decisions that will affect the business – there must be more than
one proprietor.
A partnership may be creating in two ways:
1) For a specific pre-determined duration e.g. 3 years
2) So as to continue without reference to duration, known as a partnership at will
Partnerships do not only exist between people but can also exist between companies e.g. when
engaging in a joint venture.
Fundamental Characteristics of a Partnership
There are typical rights and responsibilities which are fundamental to the partnership:
a) The right to be involved in decision making which effects the business
b) The right to share in the profits of the business
c) The right to examine the accounts of the business
d) The right to insist on openness and honesty from fellow partners
e) The right to veto the introduction of a new partner
f) The responsibility for sharing any losses made by the business
Setting up a Partnership
Since a partnership is formed when a business arrangement falls within the definition of s1 PA 1890,
there are no specific requirements for setting up a partnership. However, a written agreement is
invaluable as evidence of the relationship and its terms. It is also useful to have a written agreement to
form a constitution to which the partners can refer to e.g. when resolving disputes and to avoid further
litigation.
