General and Limited Partnerships System †Free Samples to Students

Question: Discuss about the General and Limited Partnerships System. Answer: Introdction: Partnership is a business activity that focuses on running and operating a business entity, similar to its counterparts, sole proprietorship and a private of public company running business. Though, there are several laws and legislations that rule over the businesses in various territorial or foreign boundaries of the country, the sole objective and its definition remains the same in the Australian Continent. To proceed with a partnership business, the parties, whether be two or more, are inclined to sign in on a legal agreement. It is essential that the legal papers contain all the necessary information and conditions that are required in the contract; this may include details on how the partnership firm might operate and run its transactions in consent to all signed parties. Though, if it is seen that the collaboration of the said parties is for the sole purpose of concluding a transactional deal, it would be referred to a Joint Venture. It is contemporary for a partnership deed t o provide equal benefits and rights to all the partners regardless of any differences; its considered a necessary contractual term. It has been made mandatory by law that all parties who have signed in the deed are tied to the actions committed by one another and are the representatives of the firm, hence, if it is seen that one of the many parties have agreed to a contractual agreement relating to the business operation, the other parties are bound by law to have equal contribution regarding the action done by the first partner. It is essential for a partnership firm to be motivated by profit, if not, then such an organization cannot be recognized as a partnership firm as stated within the Partnership Act (Callison Sullivan, 2012). Within Australia, the laws that govern the various legislations of the partnership firm are very thoroughly laid down with the Partnership Act of 1963. In the case assigned, it is necessary of us to first examine any situation that point to the fact that our members, Violet, Sony, Mary and Rose have successfully made an agreement in a partnership deed and are partners by law, or not. If it comes to it that they truly are partners, then that would mean, they are lawfully liable for each others actions, equally, to an effected third person entity. The legitimacy of their deed will be determined while examining the various partnership elements. The objective here is to determine whether the partners stated above, namely Violet, Sony, Mary and Rose are bound by partnership deed or not by discussing the various laws under the act. It was given to us by Morse (2010) that when a number of individuals come together with the objective of profit making and get involved in several business activities, it is referred to as partnership. As stated before, a legal partnership deed, bound by law, is necessary for the partnerships legitimacy. It was stated in Smith v Anderson (1880) 15 Ch D 247 at 273 case that partnership is when two or more fixed entities come together to form a bond which stays together in the times of both loss and profit, in order to fulfil similar objectives. Though, by the decree of the Partnership Act, the number of select partners has been limited. It was in the Green v Beesley (1835) 2 Bing N C 108 at 112 case the concept of partnership was referred as Mutual Preparation without formation of any legal entity. The actions of partners as representatives or agents were stated in the Lang v James Morrison Co Ltd (1911) 13 CLR 1 at 11 cases. The Partnership Act 1963 (PA) derived from section 6 provides a picture of a partnership firm along with the profit making objective in an incorporated type of partnership. An external type partnership is also defined in this section. It is provided to us that both Mary and Rose are involved in a business shop, that they named Busy Bee Florists. That would mean that the couple had signed a deed which binds them to whatever action taken by one another in a business scenario. The business was suffering a loss due to the unpredicted drought and extremely hot climate. The partners had had applied for a loan from a bank as per the provisions, which includes an equal distribution of both losses and profits. A third party, Violet was given a share in the profit sharing by Rose in exchange for a loan, since the action was done with accordance to the partnership, it is legal. Similarly, Mary, in exchange for loan, gave away another share of profit to an employee named Sonny. After getting the credit, the old partners take vacation, informing the bank of the inclusion of Violet and Sonny in the firm, which was suffering heavy losses. The objective is to identify the legitimacy of entry of new partners and their part regardi ng the bank credit. The contractual terms that Violet was provided by Rose in exchange for a sum of $20000 as credit are stated in this section. Violet is assigned to 20% of profits which also includes the losses, empowering her with the power to go through the businesss accounting statements. She has right to provide statements for business in the firm at a quarterly basis. The final condition would be that the credit facilitated by her would be considered a mere credit and she will not be included in the partnership deed. This document was signed before the credit was provided by Violet. The legitimacy of a partnership contract executed by the parties and their relation is judged by Section 7 under Partnership Act. Sub-Section 2-4 of Section 7(1) exemplifies the various laws and provisions that portray the relationship of such a partnership deed among the parties. Ruddock (1879) 5 VLR (IP M) 51 case has made it very clear that even in situations where the agreement clearly states that the entity in question may not enter the partnership, if certain conditions are fulfilled, the entity will be entitled as partners contradicting the statement of the agreement. These conditions may also include the basic right of distribution of the profit sharing ratio. This shows that words of an agreement might be contradicted if conditions are fulfilled. Canny Gabriel Castle Advertising Pty Ltd Anor v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 case was when the business agreement of the parties provided that their activities are solely a supposed joint venture but the court ruled otherwise. As per the law, it was seen that the deed was neither a loan agreement nor joint venture. In-fact, it was partnership deed as both the entities had the same goal of profit making, which was decided to be distributed equally. Cox v Hickman (1880) 8 HL Cas 268 and Television Broadcasters Ltd v Ashtons Nominees Pty Ltd (No 1) (1979) 22 SASR 552 case discussed the provision in the Partnership act that bring clarity to the situation where a profit sharing evidence, that is a receipt can be used to state the various relationships in a business firm, just variation in profit wont solidify anything about the entities being in a partnership contract. Wiltshire v Kuenzli (1945) 63 WN 47 case made it clear that to find out whether two or more entities are tied together in a partnership contract, the court of law, firstly has to consider all the circumstances that play an important part in the said case. If the entities involved agree to the fact that they themselves had decided to form a partnership, any third party which is not involved in the case cannot subjugate its opinion and say otherwise. If in case the parties refuse to agree to the fact that a partnership was formed, a thorough examination will be done. In case, clean evidences are available to support either of the claims, the decision can easily be made. In the presented situation, it can be seen that Violet was totally OK with taking her share of the profit sharing ratio, not just that, she extended the contract further more on her favour by wanting to have more power in viewing the businesss accounting statements. It was clearly stated in the laws and cases discussed above that even when the transactional statements deny the fact that an entity is to become a potential partner, it the partnership conditions are met and fulfilled. Hence, even if the contractual terms state the non existence of Violet as a potential partner, her actions and demands will make her liable to hold her position as a partner anyway. As stated above, seeing how Violet isnt just sharing profits and losses with the other partners in her profit sharing ratio that is 20%, but is also capable of viewing and examining the various accounting statements of the business firm. It was also stated that Violet was given the rights to quarterly present statements regarding business to the other partners. This shows that Violet doesnt only carry the power to influence her opinion in the business activities, but also has a part to play in its operations, hence, making her a primary partner. Sonnys Legal Position It was stated in the Partnership Acts Section 7(4)(b) that if an entity gets to have a share of profit in the business firm, that will not imply the possibility that the person receiving the profit share will become a partner. It was indicated in the act that if an entity gives away an amount to the firm as credit, then the business can resort to paying a certain amount of credit interest or can simply assign a profit share to the entity in question, in the Section 7(4) (d). This, in no way will imply towards a possible addition of partner. Sonny, an employee of the firm, in the case had credited Mary with a sum of $10000 against a few conditions. One of those conditions would be her getting 1/8th profit sharing ratio in the firms losses and profits. As said in the previous cases, a mere division of profit will not result to the new entity becoming an integral part of the firms partnership deed. It was extensively clarified even in the sections 7(4)(b) and (d) of the partnership act. The fact that merely giving away a part of the firms overall profits to an entity will in no way make him a part of the firm or a partner was stated in detail in the Federal Commissioner of Taxation v Whiting (1943) 68 CLR 199 case. Considering the case of Sonny, with all the data provided and analysed, it can be clearly stated that Sonny, being a creditor to the business was entitled to either an interest or a profit share. The point of her sharing profits with the other partners of the firm will not make her a partner of the business and thus further enhances the fact that mare profit sharing ratios and providing profits to creditors will not, in any way entitle them as a legitimate partner of the firm by the common laws of Australian Continent. Conclusion After analysing the factors stated above, we can conclude with the statement that Violet can be called a partner in the business, where, on the other hand, Sonny isnt a partner. So, as said in the various laws and cases given above, it can be confirmed that all the partners are liable to each others transactional dealings. Since, violet is a legitimate partner of the firm, even though her getting into contract was not told to her and her contractual terms went against it, she has to suffer the liabilities left behind by Rose and Mary, including the losses suffered by the business during that period. Since the other partners are out for vacation, Violet will suffer the liability of the bank, just as greatly as the other two. References Callison, J. W., Sullivan, M. A. (2012). Partnership Law and Practice: General and Limited Partnerships. West. Canny Gabriel Castle Advertising Pty Ltd Anor v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 Corporation Act 2001 (Cth) Cox v Hickman (1880) 8 HL Cas 268 Federal Commissioner of Taxation v Whiting (1943) 68 CLR 199 Lang v James Morrison Co Ltd (1911) 13 CLR 1 at 11 Morse, G. (2010). Partnership law. Oxford University Press. Partnership Act 1963 (Cth) Television Broadcasters Ltd v Ashtons Nominees Pty Ltd (No 1) (1979) 22 SASR 552. Wiltshire v Kuenzli (1945) 63 WN 47