This range of US partnership documents enable various types of partnerships to be established and set out the obligations and powers of the partners.
If you intend to operate a business it is important to identify the most appropriate and effective legal relationship for you and any business colleagues; there are a number of different ways to structure this relationship, and different laws govern different relationships (see related article How to structure your business).
Under the partnership option, two or more parties enter into a contract to carry on business together with a common purpose. Because the relationship between the individuals is at law a contractual one, the relationship gives rise to rights and duties that are legally binding between the partners.
Partnership involves a contract between the partners to engage in a business in order to make a profit. Assets and responsibilities are shared by the partnership. Unlike a company, a partnership is not a separate legal entity, even though the number of partners may be large. A partnership is, however, required to file tax returns.
In general, each partner contributes either property, skill or labour, although a partner may contribute nothing and still have the rights of a partner. A partner that contributes property but no labour is usually referred to as a "sleeping partner".
The term "firm" is used to refer collectively to the individuals who make up the partnership.
The PARTNERSHIP ACT 1908 sets out much of the law about partnerships, although it may be overridden on particular matters by the particular partnership agreement (see below).
Unlike a company, an ordinary partnership does not have to be registered. However, "special partnerships" must be registered with the High Court; these partnerships allow a person to be a partner on the terms that his or her liability to the firm's creditors will be limited, like that of a shareholder in a limited-liability company
It is advisable to enter into a written partnership agreement. Partnerships are usually regulated by written agreements, sometimes called "articles".
Many of the provisions of the PARTNERSHIP ACT 1908 apply only if there is no provision for the matter in question in the partnership agreement; therefore the partnership agreement may override these rules in the Act.
Even though there is a written partnership agreement, the partners may vary the agreement orally.
Written partnership agreements commonly include the following:
If you and your spouse operate a farm together, you may well not have a written agreement unless you have been farming for some years, because since 1983 Inland Revenue has not required husbands and wives to have written agreements for tax purposes. But the policy of the Accident Compensation Corporation (ACC) on compensation for replacement labour makes a written agreement desirable.
If you or your spouse is injured and unable to work for a period, ACC will not pay full compensation for the cost of employing replacement labour. ACC will pay only 80 percent of half of that cost, its reasoning being that the other partner (your spouse) should carry half the cost, as he or she would with other partnership costs.
But if you have a written partnership agreement, and the agreement says that an injured partner has an obligation to meet the entire cost of the replacement labour, ACC will pay 80 percent of the replacement labour costs.
If you are intending to buy or establish a business (see related articles How to buy a business ), you will need to consider how you should structure it. There are a number of options to consider, and these are listed below.
Operating as a sole trader is the simplest form of operation and suits many small businesses. The individual personally owns all assets and receives all profits, but also personally bears all responsibilities and all liability for losses.
Under the partnership option, two or more parties carry on business with a common purpose. (The term "firm" is used to refer collectively to the individuals who make up the partnership.)
This form of operation has many of the advantages of a sole trader, but the assets and responsibilities are shared by the partnership. Unlike a company, a partnership is not a separate legal entity. It is, however, required to file tax returns. (See How to enter into a business partnership agreement ).
As well as ordinary partnerships, there are also "special partnerships", which allow a person to be a partner on the terms that his or her liability to the firm's creditors will be limited, like that of a shareholder in a limited-liability company (see below). Unlike the ordinary partnership, a special partnership must be registered with the High Court.
Unlike a partnership, a limited-liability company is a separate legal entity. Among other things, this means that the company can sue and be sued in the name of the company as if it were a natural person.
In general, if the company is liquidated (wound up) the liability of a shareholder of a limited-liability company is limited to any amounts that are unpaid on the shareholder's shares. In practice this transfers the risk of business failure from the shareholders to the business's creditors.
To be registered as a company, a company must have at least one share, one shareholder and one director. You must first reserve a name for the company with the Companies Office, and then apply for the company to be registered and incorporated under the COMPANIES ACT 1993 (see How to form a company ). It is, however, possible to buy an "off-the-shelf" company that has already been registered, and then apply to change the company's name.
Another possible business structure, although not popular in New Zealand, is that of a trading trust. Here, those who own the business are separate from those who receive the benefit of the income from the business (see How to set up a trust).
An agreement for use by a company or corporation who is admitting an employee as a partner.
This kit provides instructions and links for registering your business as a limited liability partnership.
A Partnership Agreement allows you to structure your partnership relationship in a way that both serves your business and preserves your rights.
A Partnership Agreement is a legal document that memorializes the partnership of two or more individuals (not husband and wife) in a for-profit business endeavour.
Useful forms and guidelines to assist you in amending a partnership agreement.
Forms and instructions for preparing the necessary paperwork and setting up a new partnership.
Helpful forms and instructions to assist in terminating a partnership.
Useful tools for determining the details of a partnership's purpose, structure and governance prior to its formation.
This Offer to Purchase Partnership Interest is for use by one partner of a company to purchase another partner's interests.
This Subscription to Limited Partner Units contains two versions of this document and is for use when an individual purchases units in a limited partnership.
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