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What is a Partnership?

Bottrell Accountants | Newcastle Accounting Firm | Maitland AccountantsPartnerships

A partnership is defined by the Partnership Act 1892 (NSW) as the relationship which exists between persons carrying on a business in common with a view to profit. It involves an agreement between two or more parties to enter into a legally binding relationship and is essentially contractual in nature.

It’s wise to have a formal written partnership agreement because it sets out each partner’s responsibilities and reduces the likelihood of disputes. For example, one partner may be contributing more money or time to the business and therefore be entitled to a greater share in the business. An agreement can also cover what happens if the structure is dissolved or changed, for example, through the retirement or death of one of the partners.

The Partnership Act (PA) enables three types of partnership to be formed:

  • a partnership (‘normal partnership’),
  • a limited partnership, and
  • an incorporated limited partnership.

There are differences between these types of partnership in terms of their requirements and features, for example registration, complexity, source of funds, liability of the partners for the debts of the partnership and taxation treatment.

In the case of registration requirements, the Partnership Act only requires ‘limited partnerships’ and ‘incorporated limited partnerships’ to be registered.

For More information on Partnerships see our website WWW.BOTTRELLBUSINESS.COM.AU

 

Credit to fairtrade.com.au

 

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