Partnership Types and Roles

Admission of Partnership

Types of Partners

• Active Partners: Involved in the day-to-day operations of the business
• Sleeping Partners (Dormant Partners): Not involved in the day-to-day operations, but still share profits and losses
• Nominal Partners: Not involved in the business, but lend their name to the partnership
• Partner by Estoppel: A person who allows others to believe they are a partner, even if they are not

Partner Roles

• Managing Partner: Oversees the partnership's operations and makes key decisions
• Limited Partner: Has limited liability and is not involved in the day-to-day operations
• General Partner: Has unlimited liability and is involved in the day-to-day operations

Admission Procedures

1. Partnership Agreement: A written agreement outlining the terms of the partnership
2. Admission of New Partner: Existing partners agree to admit a new partner, usually by a unanimous decision
3. Revaluation of Assets: Assets are revalued to reflect their current worth
4. Goodwill Valuation: Goodwill is valued and allocated to the new partner
5. Capital Adjustment: Existing partners' capital accounts are adjusted to reflect the new partner's admission

Partnership Agreement

• Written Agreement: Outlines the terms of the partnership, including roles, responsibilities, and profit-sharing
• Partnership Deed: A formal document outlining the partnership agreement

Partner Responsibilities

• Fiduciary Duty: Partners owe a duty of loyalty and care to the partnership and each other
• Accounting and Disclosure: Partners must maintain accurate accounts and disclose financial information to each other
• Indemnity: Partners are liable for each other's actions

Workmen Compensation Reserve

• Provision for Workmen Compensation: A reserve fund set aside to cover work-related injuries or illnesses
• Liability: The partnership is liable for workmen compensation claims

Investment Fluctuation Reserve

• Fluctuations in Investment Value: A reserve fund set aside to account for changes in investment value
• Profits and Losses: Gains or losses on investments are allocated to the reserve fund

Capital Adjustment

• Revaluation of Assets: Assets are revalued to reflect their current worth
• Adjustment of Capital Accounts: Partners' capital accounts are adjusted to reflect the revalued assets

Types of Partners

• Active Partners are involved in the day-to-day operations of the business
• Sleeping Partners (Dormant Partners) are not involved in the day-to-day operations, but still share profits and losses
• Nominal Partners lend their name to the partnership, but are not involved in the business
• Partner by Estoppel is a person who allows others to believe they are a partner, even if they are not

Partner Roles

• Managing Partner oversees the partnership's operations and makes key decisions
• Limited Partner has limited liability and is not involved in the day-to-day operations
• General Partner has unlimited liability and is involved in the day-to-day operations

Admission Procedures

• A Partnership Agreement outlines the terms of the partnership
• Existing partners agree to admit a new partner, usually by a unanimous decision
• Assets are revalued to reflect their current worth
• Goodwill is valued and allocated to the new partner
• Existing partners' capital accounts are adjusted to reflect the new partner's admission

Partnership Agreement

• A written agreement outlining the terms of the partnership, including roles, responsibilities, and profit-sharing
• A Partnership Deed is a formal document outlining the partnership agreement

Partner Responsibilities

• Partners owe a duty of loyalty and care to the partnership and each other (Fiduciary Duty)
• Partners must maintain accurate accounts and disclose financial information to each other (Accounting and Disclosure)
• Partners are liable for each other's actions (Indemnity)

Reserves

Workmen Compensation Reserve

• A provision for workmen compensation claims is set aside to cover work-related injuries or illnesses
• The partnership is liable for workmen compensation claims

Investment Fluctuation Reserve

• A reserve fund is set aside to account for changes in investment value
• Gains or losses on investments are allocated to the reserve fund

Capital Adjustment

• Assets are revalued to reflect their current worth
• Partners' capital accounts are adjusted to reflect the revalued assets