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Difference between revisions of "Forming a Partnership"
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==It’s best to have a partnership agreement== | ==It’s best to have a partnership agreement== | ||
A carefully drafted agreement can be a very useful planning tool and help your partnership run smoothly. It can cover certain things like the following: | A carefully drafted contract called a partnership agreement can be a very useful planning tool and help your partnership run smoothly. It can cover certain things like the following: | ||
*Will you share the profits 50/50? What if one of you puts up more money at the beginning than the other? | *Will you share the profits 50/50? What if one of you puts up more money at the beginning than the other? | ||
*Will you also share equally in the losses? | *Will you also share equally in the losses? | ||
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*What happens when a partner doesn’t live up to his or her obligations? | *What happens when a partner doesn’t live up to his or her obligations? | ||
It’s true that verbal partnership agreements or “hand shake” agreements may be enforceable. But partnership agreement should be in writing, so you can prove what the terms of the agreement are. | It’s true that verbal partnership agreements or “hand shake” agreements may be enforceable. But partnership agreement should be in writing, dated and signed by all parties, so you can prove what the terms of the agreement are. | ||
==What is a limited partnership?== | ==What is a limited partnership?== | ||
Limited partnerships are mainly a tool for investors who want to invest in the partnership business, but who aren’t interested in getting involved in running the business. If you’re an investor only, you could be a limited partner and would only be responsible for the debts of the partnership up to the amount of money you invested or agreed to invest. This is true so long as you don’t get involved in the management of the partnership. But if you help manage the business, then you would have the same liability you’d have if you were a partner in a general partnership. | Limited partnerships are mainly a tool for investors who want to invest in the partnership business, but who aren’t interested in getting involved in running the business. If you’re an investor only, you could be a limited partner and would only be responsible for the debts of the partnership up to the amount of money you invested or agreed to invest. This is true so long as you don’t get involved in the management of the partnership. But if you help manage the business, then you would have the same liability you’d have if you were a partner in a general partnership. | ||
Note that a limited partnership must have at least one general partner who has the usual unlimited personal liability. Usually the general partner is a company incorporated just for that purpose, so that its shareholders aren’t generally personally liable for the obligations the company has as a company (refer to script [[Forming a Private Company (Script 267)|267]] for more information about companies). The general partner is the only partner who can manage the business, so the shareholders who have most of the voting shares of a general partner company also control the management of the partnership business. | Note that a limited partnership must have at least one general partner who has the usual unlimited personal liability described earlier with respect to general partnership. Usually the general partner is a company incorporated just for that purpose, so that its shareholders aren’t generally personally liable for the obligations the company has as a company (refer to script [[Forming a Private Company (Script 267)|267]] for more information about companies). The general partner is the only partner who can manage the business, so the shareholders who have most of the voting shares of a general partner company also control the management of the partnership business. | ||
==What is a limited liability partnership?== | ==What is a limited liability partnership?== | ||
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You have to pay a fee to register your partnership with the Registrar of Companies and to have the Registrar search the corporate records to make sure someone else isn’t already using your partnership name. Depending on the type of partnership, procedures must be followed regarding the use of the partnership name and address. If your partnership is for trading, manufacturing or mining purposes, or is a limited partnership or a limited liability partnership, you also have to file other information and documents with the provincial government. | You have to pay a fee to register your partnership with the Registrar of Companies and to have the Registrar search the corporate records to make sure someone else isn’t already using your partnership name. Depending on the type of partnership, procedures must be followed regarding the use of the partnership name and address. If your partnership is for trading, manufacturing or mining purposes, or is a limited partnership or a limited liability partnership, you also have to file other information and documents with the provincial government. | ||
==How do I get rid of a partner?== | |||
Pursuant to the ''Partnership Act'', a partner cannot be expelled from a partnership, even by a majority vote, unless the power to do so has been expressly given in a partnership agreement. | |||
==How do I end a partnership?== | |||
Unless otherwise agreed to in a partnership agreement, any partner may end the partnership at any time by giving notice to all of the other partners. Alternatively, a partnership agreement can be used to set a fixed term for the partnership, meaning that it can be designed to automatically end after a predetermined amount of time, or after the completion of a predetermined undertaking or venture. | |||
==Consider seeing a lawyer== | ==Consider seeing a lawyer== | ||
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[updated | [updated March 2015] | ||
