If you are thinking of starting a new business, you must have come across the term “Business Partnership”. So what is it? And what does it mean? Well, a partnership is an agreement under which two or more entities, usually companies, agree to work together to promote their mutual interests. Partnerships can be formal organizations, people, interest-based industries, communities or combinations. Generally, in the case of a business, the partnership refers to the company and its directors, management and other personnel.
Under normal circumstances, a business partnership occurs when one person starts a new business with other partners. Under certain circumstances, however, the partners do not have to start a business with each other; rather, they can enter into a written partnership agreement. Such written partnership agreement gives the partners the right to use, sell and share the profits from the business. These profits can be kept by the partners until such time as the business grows to a level where all of the partners can begin to profit from it on their own. The partner who receives the profits first then decides whether to sell any of the profits to the other partner.
The written partnership agreement lays down the responsibilities of each partner and the powers that they have to make business decisions. It also explains the relationship of each partner with respect to each other. The partnership will also decide how the funds from the business will be used, and who among the partners will make decisions concerning day-to-day business decisions. Each partner is expected to adhere to the decisions made by the other partner. If any partner refuses to comply with the other partner’s decision, he or she is liable to the other partner for financial losses caused due to refusal to comply with the other partner’s decision.
Many business partnerships are actually written contracts, and the law requires that they are legally binding. Any agreements that are not legally binding have no legal value and cannot affect the partners’ rights and obligations under the contract. Most business partnerships are written documents, which make specific reference to the assets and liabilities of each partner involved in the partnership and the decision-making power that each partner has to affect the partnership. The purpose of a document is to make it easier for one party to specify how the money from the business will be divided, and when each partner has the right to participate in the decisions affecting the partnership. These auctions, via sites such as Boat Parts are also available online.
The general partnership refers to the situation in which two people are managing or partaking of the same business entity. A general partnership agreement may set out how much of the profits will go to each partner and how the other partner will receive their portion. In this kind of partnership, the partners share in the profits of the partnership. There are some general partnerships that also set out the ways in which the partnership will decide the dividend distribution. This is known as the ‘active’ or ‘limited’ partnership.
Limited partnerships are formed in a different way, in which only one partner is involved in the partnership’s management. This type of partnership does not share in the profits and so the partners do not have to divide their profits with one another. The active partnership refers to partnerships that share in the profits of the business entity. This type of partnership has to be filed with the appropriate authorities and is often referred to as ‘corporeal’ partnership. Some common, limited partnership interests are share ownership, profit sharing, credit risk, property risk and inheritance risk.