PARTNERSHIPS
If properly conducted, there is much to commend the management of
a business through partners.
Never go into a partnership with a man who puts in his experience
against your capital, unless you know him like a brother.
"It lasted about a year," said a man who had done this. "Now the
fellow, who has cleared out, has the capital and I have the
experience."
A partnership is an agreement between two or more persons to
associate for the purpose of carrying on a certain form of
business.
Each member of a copartnership must contribute a stated
contribution to the establishment of the enterprise, but each need
not give the same amount.
Neither is it necessary that the contributions of each to the firm
shall be of the same character.
One may contribute a building, another machinery, or material, and
still another money.
The shares in the profits are based on the cash values of the
different contributions.
The work of the different parties may be estimated as
contributions, but in such cases it is better to pay the worker a
fixed compensation, and charge this to the expense account.
PREPARE AND SIGN
Never go into a partnership based on a verbal agreement, unless it
be for the distribution of fish, game or nuts, when out with a
friend for a holiday.
Have the copartnership articles carefully drawn up and signed
before you put a cent into the undertaking. A document like this
can be appealed to should disputes arise; and should a partner
die, his heirs may find it of the greatest value.
The articles should contain:
1. The amount to be contributed by each.
2. The nature of the business.
3. The time which the partnership is to last.
If the time is not specified, a partner may withdraw whenever he
pleases.
If the profits are to be equally divided, this should be stated
and provided for.
SILENT PARTNERS
When a man invests money in a business in the management of which
he takes no active part, he is said to be a "silent partner."
Such a partner has a share in the gains and he is responsible as
the others for the firm's liabilities.
Again, a man may not give money or time to a firm, but is willing,
for business reasons, that his name shall appear as if he were in
the association. In this case the man is known as a "nominal
partner."
Although this man is not entitled to a share in the profits and
has no money invested, yet he can be held liable for the debts and
other obligations. The reason for this is very plain.
LIABILITY
In all matters rightly belonging to the business of a firm, any
member has the right to act, and his acts will be held binding in
law.
It is usual for partners active in a business to have each his
separate duties, but even if these duties be designated in the
articles of agreement, the outside business world is not supposed
to know anything about the relative duties of the members of a
firm as decided among themselves, so it is decided that each is
empowered to act for his partners.
Under the usual articles, it is stipulated that while a dual
partnership lasts, neither of the members shall make a note, sign
a bond, or enter on any outside obligation as an individual
without having secured the written consent of his business
associates.
Each partner in a firm is liable with the others for all the
business indebtedness.
If a firm fails, and the assets are found not sufficient to
satisfy the creditors, they can levy for satisfaction on the
private property of one or all of the partners.
If a member of a firm should become so far indebted, as an
individual, that he cannot comply with his obligations, the
interest he holds in the firm may be disposed of and applied to
the payment of his debts.
This does not mean that the creditors may take or seize on any
particular thing which the firm holds jointly, but that the
debtor's interest in the concern may be so disposed of. All this
the law has provided for.
A new partner admitted into a firm cannot be held responsible for
the debts of the old concern.
HOW TO DISSOLVE
Every partnership agreement must provide for and distinctly state
the period for which it is to continue.
At the end of the period named, the partnership is dissolved by
limitation.
If the partnership is to continue, a new agreement must be made
and signed.
On proper application, a partnership may be dissolved by an order
of the court.
If a member who has become objectionable to his partners should
not agree to a dissolution of the firm, the partners may apply to
a court of competent jurisdiction for a decree of dissolution.
No member of a firm can withdraw at his own option. The consent of
the other partners is necessary, and before he is released he must
provide for his share of the obligations.
Notice of dissolution should be published, and notices sent to
agents and others interested.
The following is the customary form of notice:
The copartnership heretofore existing
between John Smith, Harry Roberts and
Thomas Allen, under the firm name of
Smith, Roberts & Co., is this day
dissolved by mutual consent.
John Smith.
Harry Roberts.
Thomas Allen.
June 30, 1910.
SPECIAL PARTNERSHIPS
Limited or special partners are not recognized in some states.
This is a method of association whereby a person joins a
partnership, putting in a sum agreed on, and which he may stand to
lose as an investment. He is entitled to a _pro rata_ in the
profits, but he cannot be held for the debts.
In some countries marriage is regarded as a civil contract or form
of partnership, subject to dissolution by the courts.