A partnership is a type of business organization in which two or more people work together with a view to profit. These two people can be individual or corporations.
A partnership has the following features:
- Partners share the profits and the losses of their business
- Like a sole proprietor, partners face unlimited liability for the claims made against their partnership
- Partners act as agents for each other, and are therefore able to enter into contracts that bind all the members of the partnership. In other words, you are legally responsible for business-related decisions your partner makes.
- In Alberta, partnerships are required to register their name with the Corporate Registry.
Because partners are jointly and severally liable for the actions of their other partners, it is important that you trust your partners, and know what they are doing. It is also important that you have a written Partnership Agreement. This document sets out what everyone’s expectations are for the partnership, how and when the partnership can take on debt, enter into contracts, and end the partnership.
Even if you do not have a formal written agreement in place, as soon as you start to share expenses and profits, you are in a partnership. To ensure you are properly protected, it is important to have a formal partnership agreement in place. This is one time where silence is not golden.
If you are thinking of going into business with someone, or getting financial backing from someone, a partnership may be the option for you. We are happy to sit down and discuss the benefits and drawbacks of this form of business ownership with you, and your business partner. Call and set up an appointment with one of our lawyers.