When Tolu and Chuks who are really good friends decide to go into the sale of clothes and footwear as a team, their business is in form of a partnership. They will share the profits from the business and when there is a need to offset the debt, they will both be responsible for it. Hence, a partnership is a structure of business in which at least two to twenty people run a business for the purpose of making a profit and they both share the profits and the liabilities of the business.
Your partnership can be formed orally, by a written agreement, or by inference from the conduct of you and your partner(s). But a written agreement must state the terms and conditions of your partnership. Where there is no written agreement, the terms of your partnership can be inferred from your oral agreement with your partner(s) and your conduct.
In forming a partnership, you and at least one other person must have agreed to do business together; your business must be lawful and it must be continuously carried on by all the partners with the purpose of earning a profit, and the profits and liabilities from the business must be shared by all the partners.
You and your partners are deemed agents of the business. So, you can act on behalf of your partners, and in the same way, you are responsible for your actions and those done on behalf of the business. Likewise, if Mr. Grey, your partner, acts on behalf of the business you are running together, you will be responsible for the consequences of the action the same way Mr. Grey will be.
Your partnership business is jointly controlled and managed by all the partners. So, if Mr. Grey dies, the partnership will be automatically dissolved, unless there is a prior agreement between you and Mr. Grey to the contrary.
Partnership as a form of business is broadly categorized into three: general partnership, limited partnership, and limited liability partnership.
Follow our subsequent posts to read about these types and know which one is suitable for you.