Partnership Law Concepts

Partnerships Overview

• Income is pooled among partners; expenses deducted, and profits or losses allocated accordingly.
• Defined under NBPA S.2(1) as a relationship between individuals conducting a business for profit.
• Not recognized as a separate legal entity (Thorne v NB).

Requirements for a Partnership

• Determined by facts, circumstances, and intent of parties involved (Continental).

Relationship Between Parties

• A partnership agreement outlines rules for partner rights and obligations.

Carrying on a Business

• Key requirement indicating partners are jointly engaged in business activities.

Partners "In Common"

• Partners contribute assets and efforts toward the venture.
• Profits and losses are shared, not revenue (Pooley).
• Partners possess undivided interests in partnership properties.
• Involvement can include skills, knowledge, and expertise.
• Partners share mutual control and management rights.
• Must file income tax as a partnership and maintain joint bank accounts.

With a View to Profit

• Partnerships aim to generate profit through collective efforts.

Types of Partnerships

• General Partnerships

  • Characterized by unlimited liability; profits and losses shared according to ownership percentage.
  • General partners make business decisions.

  Advantages

  • Flexibility in management structure and partner selection.
  • Loss utilization through income pooling from various sources.
  • Simple startup and dissolution process.

  Disadvantages

  • Unlimited liability for all debts and obligations.
  • Finding a suitable partner can be challenging, requiring trust and expertise.
  • Higher taxes for increased income could lead to a higher marginal tax rate.
  • Partnership dissolves upon the death of a partner.

• Limited Partnerships

  • Composed of at least one general partner and one limited partner.
  • Limited partners' liability is restricted to contribution amounts and cannot engage in management.
  • General partners bear full liability for business debts.
  • Limited partners can assign interests and are entitled to repayment of investments.

• Limited Liability Partnerships

  • Exclusively composed of limited partners; no general partners.
  • Common among professionals; partners are shielded from negligence claims of others.

  Exceptions to Liability

  • Partners remain liable for their direct negligence or wrongful acts (NBPA s.48(2)).
  • Partner's interest in partnership property can be subject to claims against the partnership (NBPA s.48(3)).

Partnership Agreement Must Include

• Partnership name and place of operation.
• Duration of the partnership.
• Capital contributions by each partner.
• Property ownership details.
• Arrangements for profit and loss sharing.
• Rules for partner withdrawals (drawings).
• Indemnity provisions for expense reimbursement among partners.
• Outline of each partner’s duties, powers, and voting rights.

This quiz covers essential concepts related to partnerships, including income pooling, expense deductions, and profit allocation among partners. It examines the legal definitions and implications of partnership agreements, utilizing case law for clarification. Test your understanding of how relationships between parties are determined in partnership law.