What is a Partnership?
Unlike companies, partnerships are defined as legal entities who can sue and be sued only if they register in the registry of partnerships. If the partners have decided not to register, it is limited in its actions, for example it cannot register assets under its name. Should it decide to register, all partnership assets are equally owned by all partners unless entrusted to the care of trustees.
Principles of Partnerships, unless determined otherwise in the partnership agreement:
- All partners are entitled to equal ownership of assets and partnership profit, and also are equally liable to cover losses;
- The partnership must reimburse every partner for expenses or payments made by them on behalf of the partnership;
- Every partner that invested beyond the required minimum of capital in the partnership may consider the difference as a loan;
- In cases where a partner chooses to delegate responsibilities to another, this decision in no way makes that person a partner but he/she may receive a measure of partnership profits.
One of the key advantages of a partnership is a sufficient, simple and straight forward incorporation process, especially when compared to that of a limited company, due to the lack of a corporate decision-making mechanism.
Another advantage is in terms of taxation, where most places do not consider partnerships taxable which means each partner is taxable on a personal basis.