RSM225 SP + Partership

Sole Proprietorship

• An unincorporated business owned by a single person

• No formalities required

SP Pros and Cons

• No legal separation: income reported as personal income. 

• No special advantage

• No special requirements

• Unlimited Liaiblity

Partnership

A relationship

between two or more people

to conduct buisness

for view of profit

What a parternship governed by

Governed by the Partnership Act.

Partnership Act

• Partnership property: All property “brought into” the partnership is partnership property, to be used only for the partnership business

• Relationship founded on mutual trust (fiduciary duty of patterns) .

• Share equally in capital and profits

• Indemnity for business-related expenses or personal liabilities.

• Partners are not entitled to interest on capital contributions

• No partner is entitled to compensation for acting in partnership business. 

• Differences are solved by majority vote, but any change in the nature of the partnership business must be approved by all partners

• New partners must be approved by all existing partners

Is parternship property owned by partners

no

Partnership Agreement:

an agreement between persons to create a partnership and (usually) to set out the terms of the relationship. Agreement between partnership can override statute. 

• Key issues

  • Entering and leaving the partnership

  • Managing the business of the partnership

  • Capital contributions

  • Profit sharing

  • Dispute resolution

Can be verbal, written, or court can apply partership if based on conduct.

Fiduciary duty of partners

• Relationship founded on mutual trust (fiduciary duty of patterns).

• Must not act in bad faith or against the interests of the parternship

Cons of partnership

• A partnership is not a separate legal person

• Partners are personally and jointly liable for the debts and liabilities of the partnership

  • A suit against the partnership applies to all partners at the time of liability

• You collect against any partner, who has rights of contribution against other partners

• Partners are agents of the partnership, and the acts of one partner bind all partners

Limited Partnership

• One partner manages the business and has unlimited liability.

• One partner does not participate in management and liability is limited to amount of contribution. 

• - only allowed for law or accounting firm

• A LLP is created

  • By written agreement between partners

  • By using “LLP” at the end of the name

Does the partnership need to be registered?

if you dont any case you make is thrown out as well as any defense you make in court

Co-owners of assets

- don't meet all the GPP requirements
- not jointly and severally liable for debts
- no fiduciary duties to each other
- no PAct implied terms
- no authority to ind other co-owners