Question

describe the three basic requirements/tests for a general partnership.

Answer 1

A mutual partnership is a business arrangement whereby two or more persons agree to share in all property, income and financial and legal responsibilities of a jointly owned business structure. These partners commit to unlimited liability, meaning that either of their personal assets may be liable to the obligations of the relationship. In addition, any partner can be sued for all of the business debts of a partnership.

The general partnership as a legal form defines a corporate arrangement managed by several partners who are personally liable. You may be expected to file additional financial reports depending on the size of your company. Partners need not always be natural persons, but they can also be legal persons (e.g. another company). In this (uncommon) situation, it may be necessary to change the legal form or the company may be needed to include the names of the legal entities in its own name. There are no limits on who can become a partner in the business when it comes to the nature of the general partnership.

That partner has the agency in a general partnership to enter into binding agreements, contracts or business deals unilaterally, and therefore all other partners are obliged to adhere to those terms. Not surprisingly, these practices can lead to inconsistencies, and so many effective general partnerships incorporate structures for conflict resolution into their partnership agreements. In some cases, only if there is either a complete consensus or a majority vote, the partners decide to continue with major decisions. The partners may nominate non-partner appointees to oversee the relationships in other situations, similar to the board of directors of a corporation. In any case, a broad agreement is important because even innocent players can be tax on the hook when all partners perform unethical or illegal actions when all partners have unlimited liability.

Usually, general partnerships end when one of the partners dies, is disabled, or leaves. Provisions may be entered into an agreement offering guidance for progress in these cases. For example, the agreement may provide for the transfer of the interest of the deceased partner to the surviving partners or a successor.