A General Partnership

The General Partnership

Starting a business with a friend or another business person is like creating a team, which in the business world is often called a partnership. There are different kinds of partnerships, and they all have their own rules. Let’s talk about three kinds: general partnerships, limited partnerships, and limited liability partnerships.

Firstly, it’s important to know that a partnership isn’t its own separate thing like a corporation is. Instead, it’s more like a group of people deciding to run a business together. In Nova Scotia, the law says a partnership is basically a group of two or more people who start a business with the goal of making money.

The Supreme Court of Canada has looked at what a partnership is a couple of times. They’ve said that whether or not you have a partnership depends on what everyone involved really intended to do together and all the facts about what’s actually happening.

If you’re thinking about starting a partnership, it’s super important to know what it means legally, because once you’re in a partnership, you share the responsibilities and risks. Courts look at things like how you share profits and losses, how much money or stuff you each put in, and how much each person gets to decide in the business to figure out if you really have a partnership.

If your partnership is doing business under a special name that’s not just the names of the partners, you have to register that name. If you don’t, you could get in trouble just like a person running their own business by themselves could.

One thing that can be risky in a partnership is that each partner can make decisions that affect everyone else. This means if one partner makes a bad decision, everyone might have to deal with the consequences. This is written in the law in Nova Scotia, too.

Since every partner can make these decisions, being in a general partnership can be a bit scary if there are a lot of people involved who don’t really know each other. This is different from a limited partnership or a corporation where there’s more protection.

More partners also mean there’s a higher chance of someone suing the partnership. You can buy insurance to help with some of the risks, but just like for a person running their own business, insurance doesn’t cover everything.

Partnerships have some default rules, like everyone sharing the profits and losses equally, everyone having an equal say in the business, and all partners having to agree before new people can join. But you don’t have to stick to these rules—you can make a partnership agreement that sets different rules that make sense for your team.

It’s a really good idea to make a clear partnership agreement that says who does what, who gets what, and how you’ll handle disagreements. This can help prevent fights and problems later on. A lawyer can help you write this agreement so it’s easy to understand and covers everything important.

Partnerships can end in different ways: the partners can agree to break up, something in the agreement might cause the partnership to end, a court might order it, or if a partner dies or goes bankrupt. If some partners want to keep the business going, they might start a new partnership or follow a plan that was already made for how to keep the business running. This plan could involve insurance or how to buy out a partner’s share if they leave.

One big plus of a partnership is that you have more resources because everyone brings something to the table, like money, skills, or other things you might need. You don’t always have to borrow money because you have what the partners bring in.

Even though a partnership isn’t a separate legal person, you still figure out the money the partnership makes or loses together, and then each partner reports their share on their own taxes.

So, if you’re thinking about starting a business with others, remember that a partnership can give you more to work with, but it also means sharing the load and the risks. It’s important to talk things out, make a solid agreement, and always know what’s going on with your partners.

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