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Partnership is a foundational element of the law of business organization. To understand a partnership, you have to consider four simple and foundational questions:
In Ontario the Partnerships Act establishes the basic rules of partnerships. Other provinces and territories have their own partnership regulations, but the principles are usually much the same as Ontario’s. The Partnerships Act defines partnerships as “the relation that subsists between persons carrying on a business in common with a view to profit”. So a few elements must be present for a partnership to exist:
This definition is based on the intention of parties, as disclosed by the circumstances. Did two people intend to carry on a business together with a view to making profit? If they did, a partnership will have been created.
The extent of each person’s investment in or, control of the partnership business will not define whether or not the partnership exists.
A partnership is not recognized as a separate legal entity. It is not legally distinct from the partners that form it. This means…
What are the rights and responsibilities of the partners?
Under the Partnerships Act, there are eight key rights and responsibilities of partners. These rights and responsibilities emanate from the basic assumption that the partners are equal with respect to their capital contributions, rights to participate in the management of the business and rights to share in the profits of the business.
The rights and responsibilities of a partner as set out above are the baseline rule established by the Partnerships Act. However, one of the most important elements of the law of partnership is that a partnership is a contractual relationship. Partnerships can be as varied as the people who are partners – partners can contract their particular rights and responsibilities, which can be different from the baseline rights and responsibilities established in the Partnerships Act. However, where a partnership contract is silent on a particular issue, the Partnerships Act’s terms for that issue will be implied.
– Isabelle Crew (3L, Faculty of Law, Queen’s University)