A partnership is an association of two or more persons to carry on a business for profit as joint proprietors of the same.
Unless otherwise agreed, each partner has the right to take part in the management of business of the firm. Partners bind each other including the firm or business to outsiders or third parties through their action in the ordinary course of business. Every partner is an agent of the business and the other partners and the principal for himself.
Partners have unlimited personal liability for the debts and obligations of the partnership. Partners owe joint and several liabilities for all the obligations of the partnership unless otherwise agreed by the concerned claimant or creditor. Any creditor of the firm can sue the partners either individually or together and any partner may be held liable for the entire amount of debts of the firm.
Partners may file a statement of authority with the designated state authority to give public notice of the powers granted or denied to certain partners.
Certain acts beyond the normal course of business require the unanimous approval of all the partners. Such acts may be specified by the partnership agreement as well as by the statute. Accordingly a partner has no authority to do the following:-
Acts not apparently for doing business of the partnership in the usual way
Admit new partners
Submit a dispute of the firm to arbitration
Confess a judgment on behalf of the partnership
Sale the goodwill of the business or do anything that would render it impossible to carry on the usual business of the partnership
Partners owe a fiduciary duty of utmost good faith and trust to each other and to the partnership. Such duty may be increased but not reduced by the partnership agreement.
In the absence of any agreement to the contrary, each partner is entitled to share the profits and liable to bear the losses of the business equally.
The partnership agreement or the law of partnership of the concerned state governs the partnership business. Most states or jurisdictions have adopted a version of either the Uniform Partnership Act (UPA) or the Revised Uniform Partnership Act (RUPA). The provisions of the partnership agreement regulate the partnership to the extent these are not in contravention of the laws of the state.
Partnership property is held in tenancy of partnership in states that follow the UPA. In contrast in states that follow the RUPA, partnership property is owned by the partnership itself.
While under the UPA the withdrawal of a partner causes dissolution of the partnership, the dissociation of a partner need not dissolve the partnership under the RUPA.
Winding up is the process by which the accounts of the business are settled among the partners and the assets of the firm are liquidated in order to make the final distribution of proceeds among the partners for dissolution of the partnership.
