CHAPTER 16: LAW OF SOLE PROPRIETORSHIP AND PARTNERSHIP!

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Sole Proprietorship!
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• simplest form of business organization!
• owner owns all assets, entitled to all of the profits, responsible for all of the debts, responsible for its success or failure!
• disadvantages:!
• limited ability to raise capital and the management-skill limitations!
• responsibility for all aspects of the business! requirements:! •
• registration or licensing of business! attractive traits:!
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• freedom!
• flexibility of the operations!
• speed of decision making!

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Partnerships!
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• two or more individuals carrying on a business with a view to profit!
• parties must have contributed capital and have actively participated in the management of the business!
• new proprietors increases the chances for growth and development!
• risk:!
• each partner is responsible for the carelessness or poor judgement of each other partner in his or her conduct of partnership business! principal differences between partnership and co-ownership:!
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Partnership

Co-ownership

contractual relationship

succession, or inheritance of property

founded on mutual trust, personal relationship that is not freely alienable

freely alienable without the consent of the other owner

partner is an agent of all other partners

co-owner is not an agent of other co-owner

share is never real property, it is always personalty may be of personalty or realty Partnership subject to the partnership act in operations, and dissolution is also according on the act

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Co-ownership dissolved or terminated under legislation that provides for division or disposition of property held jointly • joint and several liability: one partner’s actions or statements create liability for that partner, and for each of the other partners. !
• the act that the partner performs must be related to the ordinary course of partnership business before his or her act binds the other partners. If the act is not something that falls within the ordinary scope of partnership business, then only that partner would be liable. !
• the firm may also be liable for a tort committed by a partner, if the tort is committed in the ordinary course of partnership business!
• a partnership would be liable for a tort committed by an employee if the tort is committed in the performance of partnership business!
• rights and duties of partners to one another:!
• rights and duties usually set out in partnership agreement!
• if there is no partnership agreement, right and duties will be according to the act!
• under the act the only way to get rid of a member, is to terminate the partnership then start another one without the partner!
• obligation of good faith:!
• a partner may not engage in another business that is similar to,or competes with, the business of the partnership without express consent of the other partners! an assignee does not have the right to interfere in the management of the partnership,
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receives a share of profits from the assignors portion of profits, it does not allow the assignee to step into the position of the partner!
• dissolution:!
• if there is a specific term or task to be accomplished, the partnership will end upon completion! • death or insolvency of a partner!
• if the purpose is unlawful or becomes unlawful it will automatically dissolve!
• once the partnership has dissolved it is necessary to inform all customers and public by way of notice, otherwise partners may be liable!

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Limited Partnership!
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• one in which a partner, under certain circumstances, may limit his or her liability for partnership debts, and protect his or her personal estate from claims by the creditors of the partnership.!
• must have at least one or more general partners with unlimited liability and responsibility, both jointly and severally!