1. 10.1 WHAT IS THE PARTNERCHIP?
1.1. Relation which subsists between persons carrying on a business in common with a view of profit.
1.1.1. Relationship: there must relationship between at least two people
1.1.2. Business: the persons involved must be carrying out a trade or profession or any other form of business activity
1.1.3. Common: the persons must be associated with each other and working for joint benefit of each other.
1.1.4. Wiew to profit: there must be intention by the parties to make a profit. Any transactions must be carried out with a view to make a profit. Even if they make a loss - provided that objectives was a profit it is still a partnership
1.2. Ther are two different types of partnership
1.2.1. A Partnership under the Partnership Act 1890
1.2.2. A Limited Partnership under the Limited Partnership Act 1907
1.3. Classification of a partner:
1.3.1. a) General partner: a partner actively involved in a day-to-day operational running and financial management of a firm. Has full unlimited liability for the debts of a firm
1.3.2. b) Slipping (silent) partner: a partner who has invested capital in the business and is intitled to a share of profit made but who is not involved in a day-to-day running of a business. Has full unlimited liability for the debts of the firm.
1.3.3. c) Limited partner: a partner who has invested capital in the business and is intitled to a share of profit made but who is not involved in a day-to-day running of a business. Has liability fixed at a certain amount by registering himself with CRO as limited liability partner. No limit on the number of limited partner provided at least one of the partners is active.
1.3.3.1. In order to register the limited partner with CRO the firm must provide them with information: 1) their name, 2) the nature of the business, 3) the name of each partner with limited liability, 4) the term and commencement of the partnership, 5) the amount of each partner's capital contribution, 6) a statement that the liability of the partnership is limited.
2. 10.2 FORMATION OF A PARTNERSHIP
2.1. o Agreement Among Partners: A partnership can be formed through an explicit written or oral agreement or inferred from conduct. In practice, a written partnership agreement is often advisable to prevent disputes.
2.2. If ther is no written partnership agreement or "Deed of Parntnership"(it is not a legal requerements) the partnership will be governed by Partnership Act, 1890
2.3. Deed of Partnership usually contains: A) the name of a partnership B) the adress and type of business C) the rights and duties of each of the partner E) the date partnership will commence and intended duration (if fixed term partnership) F) bank details and authorised signatories fot firm's bank account G) details re partnership meetings, voting rights and obligations re audits and accounts H) details of the capital contribution of each partner and devision of profits of losses I) what happens on the deat or personal buncruptcy of one of a partners J) how business assets can be valued on dissolution or retirement K) provisions relating to retired partners, whethe they can compet with firm L) any restrictions for interest outside the firm M) admission of a new partner or expulsion of an existing
3. 10.3 RIGHTS AND DUTIES OF A PARTNERS
3.1. 10.3.1Duties of a Partner
3.1.1. Fiduciary Duties:
3.1.1.1. A duty to act in a good faith and in the best interest of the partnership at all tilmes
3.1.2. Duty of disclosure:
3.1.2.1. A partner is under duty to provide all other partners with full information relating to any transactions that impact the partnership. This disclosure must be true, clear and complete.
3.1.3. Duty to accout:
3.1.3.1. Duty to account for all benefits obtained from any transaction carried out tor the benefit of the partnership
3.1.4. Duty not to compet:
3.1.4.1. A partner is under duty not to compet with the business of the partnership without of expressed content of the other partenrs. If does compet, liable to account to a partnership for any profit aquired
3.2. 10.3.2 Rights os a Partner
3.2.1. Good faith and mutual confidence:
3.2.1.1. Has the right to be treated by the other partners in good faith and with mutual confidence.
3.2.2. Management:
3.2.2.1. An active partner in a firm has the right to be involved in the management of the partnership and to enter into contracts on behaf of the firm
3.2.3. Profits and losses:
3.2.3.1. A partner has the right to a share in any of the profits of a firm. Profit shared as per the agreement (not olways equally). Ther is also duty to share any losses that the firm make. Even if not personally responsible for debts - must contribute towards it. Ulimited liability ( unless limited liability partner), collective responsibility for partners portion of debts.
3.2.4. Expulsion:
3.2.4.1. The right not to be expelled from the partnership, unless he is acting in a bad faith ( usually ananimous consent of the other partners). A clause must be encluded in the agreement settint out this prosedure.
3.2.5. New Parther:
3.2.5.1. A partner has the right to veto the introduction of a new partner to the firm - as a new partner cannot be introduced without the ananimous consent of the existing partners (unless egreement states otherwise).
4. 10.4 AUTHORITY AND LIABILITY OF A PARTNER
4.1. 10.4.1 Authirity of a partner to contract
4.1.1. Actual authorithy:
4.1.1.1. ahthorith that is expressly stated in the partnership agreement. When a partner acts withis his actual authority and enters into a contract in the normal course of business with a third party, all the partners in the firm are bound by the contract. If third party considers that the firm has breached its obligations under the contract, may take an actins against the partnership.
4.1.2. Implied authorith:
4.1.2.1. Implied authorith is the authority that third parties, who contract with the firm, will assume that the parther has based on their role as active partners in a firm. If the partner has contracted without actual authority the firm may still be liable for any debts or losses incured as the result of the contract, if the third party was under the impression that the partner had the authority to contract.
4.2. 10.4.2 Liability of partner in contract and tort
4.2.1. In relation to a tort:
4.2.1.1. each partner is lilewise jointly and severally liable for any tort commited by one of the other partners in the ordinaty course of business ( negligence, nuisance or defamation).
4.2.2. In relation to contracta:
4.2.2.1. Where one partner creates contract that causes a loss to the firm, all the partners are bound to this contract and have liability
4.2.3. Third party actions:
4.2.3.1. A third party who is a victim of a breach of contract or tort commited by the partnership can bring an action against one of the partners individually (several liability) or a single action against all the partners in the firm (joint liability).
5. 10.5 DISSOLUTION OF A PARTNERSHIP
5.1. As with any contract, a partnership can come to an end by any of three methods:
5.1.1. Application to the court: an applicatin can be made to the court to dissolve a partnership in circumstances where a partner: A) - is incapable of continuing as a partner by reasons of mental disorder B) Becomes permanently incapable (physical incapacity) C) Is guilty of conduct prejudicially affecting the carrying out partnership duties D) Commits a breach of the partnership agreement so that other partners could not reasonably be expected to work with him E) Busines can only be carried on at loss F) Court considers it just and equitable to dissolve the partnership
5.1.2. Operation of the law: By provisions of an 1890 Act a partnership may be automatically dissolved: 1. By expiry of a fixed term agreemet 2. The termination of the project, if the agreement was entered into for that project alone 3. If no fixed date for termination, notice can be given by one partner to tetmimate
5.1.3. By agreement: The partners can ananimously agree to dissolve the partnership even prior to any fixed date stated in a partnership agreements
5.2. 10.5.1 Debts / losses of the partnership on dissolution
5.2.1. Any assets (profit and capital) of a partnership will be used to pay off all outstanding liabilities on the dissolution of the firm. Surplus assetss if any will be devided among the partners( based on how they share profits). In case of shortfall the personal wealth of the partners will be used
5.2.2. The order of priority on dissolution: 1. All debts owed to outsiders must be paid first 2. Partners loans or advances in excess of capital contribution 3. Finally, capital contributions should be repaid to each partner.
5.3. 10.5.2 Limited Liability Partnerships
5.3.1. Partnership in wich some members have limited liability for the debts of the firm. Limited to the amount contributed. As general partnership, a limited is not a separate legal entity
5.3.2. Must consist of at least one general partner and one limited partner. General - liable for all debts. Limited contributes a stated amount of capital to the firm and not liable for the debts of a firm beyond that amount. Limited partners prohibited from management of a business.
5.3.3. Investment Limited Partnerships (ILP). Purpose - management of an investment fund. Regulated by the Central Bank of Ireland (CBI) Has the same characteristics as Limited Liability Partnership, but investors in the fund( limited partners) are authorised to engage in certain activities without loosing their limited liability.
6. 10.6 DISTINCTION BETWEEN COMPANIES AND PARTNERSHIPS
6.1. Name
6.1.1. PARTNERSHIP: cannot end in 'ltd'
6.1.2. LIMITED PRIVAT COMPANY ('LTD'): name must end with 'ltd'
6.2. Registation / Incorporation
6.2.1. PARTNERSHIP: an ordinary partnership does not need to be registered
6.2.2. LIMITED PRIVAT COMPANY ('LTD'): must apply for registration with CRO befor it can commence trading
6.3. Entity
6.3.1. PARTNERSHIP: the partners and the partnership do not have a separate legal entity
6.3.2. LIMITED PRIVAT COMPANY ('LTD'): the LTD has a separate legal existance from its members and can sue and be sued in its own name
6.4. Liability
6.4.1. PARTNERSHIP: the general partners are personally liable for the debts of the firm
6.4.2. LIMITED PRIVAT COMPANY ('LTD'): the members of an LTD are only liable up to the amount of their capital contribution
6.5. Size
6.5.1. PARTNERSHIP: must be at least two partners - maximum of 20
6.5.2. LIMITED PRIVAT COMPANY ('LTD'): an LTD must have at least one member and cannot have more then 149 members
6.6. Regulation
6.6.1. PARTNERSHIP: minimal esternal regulation of partnership
6.6.2. LIMITED PRIVAT COMPANY ('LTD'): LTSs are strictly regulated by the Companies Act 2014
6.7. Accounts
6.7.1. PARTNERSHIP: do not have to file annual returns or accounts. Their only obligation is to file their tax returns yearly with the Revenue
6.7.2. LIMITED PRIVAT COMPANY ('LTD'): have to file annual returns and accounts each financial year on their annual return date
6.8. Management
6.8.1. PARTNERSHIP: all active partners involved in the management of the firm
6.8.2. LIMITED PRIVAT COMPANY ('LTD'): only the directors are involved in the management of the LTD - and there is a mimimum requerement of at least one director for an LTD company
6.9. Taxation
6.9.1. PARTNERSHIP: partners are taxed personally on their share of the firm's profit
6.9.2. LIMITED PRIVAT COMPANY ('LTD'): LTDs are taxed on their profit in the form of corporation tax
6.10. Publicity
6.10.1. PARTNERSHIP: no obligation to disclose information to the public
6.10.2. LIMITED PRIVAT COMPANY ('LTD'): must disclose information to the public including (but not limited to): 1) annual accounts 2) changes in membership 3) the LTD's registered office