Chapter 16: Law of sole proprietorship and partnership

• Business where the single owner is responsible for the management, debts, and liabilities of the business.

  Sole proprietorship
• •Sole proprietorship: business where the sole owner is responsible for the management, debts and liabilities of the business

  -Simplest form of business

  -Sole proprietor owns all assets, entitled to all profits and responsible for all debts

  -Unlimited personal liability

  -Limited ability to raise capital

  -Requires registration or licensing of business
• Legal relationship between two or more parties for the purpose of carring on a business with a view to a profit

  Partnership
• •Partnership: legal relationship between two or more parties for the purpose of carrying on a business with a view to a profit

  -Provides additional management expertise and capital i.e. growth and development

  -Partners possess greater interest in success of business than do employees
• Partners individually and as a group have liability for a debt of the partnership.

  Joint and several liability
• Who is liable for torts commintted by an employee if it was committed in performance of partnership business?

  partners
• Is property brought into the partnership a partnership property?yes or no

  Yes
• Rules in Partnerships Act

  • Equal share in capital and profits, and must contribute equally to losses
  • Indemnity by the firm for personal payments and personal liabilities
  • Interest of 5% paid on excess capital contributions
  • Not interest before profit
  • Every partner may take part in management
  • No remuneration for acting in the business
  • No new partners without consent of others
  • Differences arising may be decided by majority of partners but no change in nature of partnership without consent of all existing partners
  • Books to keep at place of business of partnership and every partner has access
• The only way to get rid of a partner would be to terminate the partnership, then form a new partnership without the undesired person.
• Termination of the partnership relationship.

  Dissolution
• •Dissolution: termination of the partnership relationship

  -Can be set forth in partnership agreement

  -Dissolve automatically at end of term set in agreement

  -Death or insolvency of a partner

  -Mentally unsound or incompetent

  -Breach of partnership trust
• •Court may dissolve partnership for several reasons:

  -Partners’ conduct is prejudicial to carrying on of business

  -Partner willfully and persistently commits breach of partnership

  -Business can only be carried on at loss

  -Circumstances deemed to be just and equitable to dissolve relationship
• •Once notice of dissolution given:

  -Liquidation of assets

  -Determine partners’ share

  -Set order of payment of debts from liquidation is set out in Act and in partnership agreement

  -Must notify customers of dissolution

  -Partners liable for debts of partnership during time as a partner
• Partner who may not actively participate in the management of the firm, but has limited liability

  Limited partnership
• Full partner with unlimited liability for the debts of the partnership

  General partner
• Partnership where individual partners are liable for the general debts of the partnership and for personal negligence but not personally liable for the negligence of other partners.

  Limited liability partnership
• Business relationship between corporations

  Joint venture