General partnership facts for kids

A general partnership is a type of business where two or more people agree to work together. It's one of the simplest ways to start a business with others. In a general partnership, all partners share the work, profits, and responsibilities.

Here are some main things about general partnerships:

• It's usually started with an agreement between the partners.
• It must have two or more people working together.
• All partners are personally responsible for the business's debts and any legal problems it faces. This means if the business can't pay its bills, the partners might have to use their own money to cover them.

What Makes a General Partnership?

General partnerships have some basic rules about how partners work together and how the business deals with others. Partners can often change these rules with a special agreement. Sometimes, they can even agree that only the partner who made a mistake is responsible for it.

Sharing Assets and Debts

All partners own the business's assets (like money or equipment) together. They are also personally responsible for any debts or problems the business has. For example, if the business owes money and can't pay, the partners might have to use their own savings or belongings to pay the people they owe.

Sharing Profits and Losses

Usually, partners share the money the business makes (profits) based on how much money each person put into the business at the start. However, partners can write an agreement that says how they will share profits and losses differently. But remember, being responsible for debts (liability) is usually shared equally unless they specifically agree otherwise.

Partners as Agents

Each partner acts like an "agent" for the business. This means if one partner makes a deal or signs a contract for the business, all other partners are usually responsible for that deal too. It's like they are all representing the business together.

What Happens if a Partner Leaves?

Normally, if a partner dies, becomes unable to work, or decides to leave, the partnership might end. However, most partnership agreements have rules for these situations. They often say that the leaving partner's share stays in the business or goes to someone else, and the partnership might continue.

Making Decisions

By default, every partner has an equal say in how the business is run. For everyday decisions, most partners need to agree. But for big changes or to change the partnership agreement itself, all partners usually need to agree. In bigger partnerships, partners might choose a smaller group to manage the business, similar to a company board.

Adding New Partners

Unless the partnership agreement says otherwise, no one can become a new partner without all the current partners agreeing. A partner can, however, give their share of the profits and losses to someone else.

Do Partnerships Have Their Own Legal Identity?

The idea of a business having its own "legal identity" means it can act like a person in the eyes of the law. This means it can own property, sue others, or be sued, separate from its owners.

Different Countries, Different Rules

Some countries, like France and Sweden, allow partnerships to have some level of legal identity. This means the partnership itself can be responsible for things, not just the individual partners.

However, in other countries, like Germany and Italy, partnerships usually don't have a separate legal identity. But even there, partnerships can often still sue or be sued, and own property. They might also be able to make creditors try to get money from the partnership's assets first, before going after the partners' personal money.

• In Bangladesh, a partnership can be seen as a separate legal identity if it is officially registered. A partnership needs at least 2 partners and no more than 20.
• In England and Wales, a general partnership does not have its own separate legal identity. However, there's a different type called a "Limited Liability Partnership" (LLP) which does have a separate legal identity.
• In Japan, there are partnerships that don't have legal identity and others that do, which are called "partnership corporations."
• In the United States, the law now says that a partnership is a separate "entity" from its partners. This is a big change from older laws.

Why a Separate Legal Identity Matters

If a partnership has its own legal identity, it means:

• One partnership can become a partner in another partnership, just like a company can.
• The partnership has unlimited legal power, meaning it can do almost anything a person can in business, without being limited by specific rules about what it's allowed to do.

See also

In Spanish: Sociedad colectiva para niños

• Articles of partnership
• Investment clubs
• Types of business entity

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