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By noting that they either share in the profits and losses arising from the enterprise, and share as partners and not as a mere compensation, or that they have either openly or impliedly held themselves out to the public as partners. To share in the profits as a clerk or bookkeeper in lieu of a salary does not constitute one a partner, neither does a sharing in the gross returns of an enterprise necessarily make one a partner.
9. Is it necessary to share both gains and losses to be a partner?
To be a partner it is needful to share in the gains but not in the losses. This rule would not hold against innocent third parties who had trusted the firm believing that each partner was responsible for his share or for all of the debts, especially when the firm had held themselves out to the world as copartners.
10. What may be the subject-matter of a partnership?
A partnership may be formed for the purpose of carrying on any business, which is not unlawful or opposed to public policy.
11. How are partnerships classified?
Into ordinary partnerships, limited partnerships and jointstock companies.
12. Who may become partners?
Any two or more competent persons may form a copartnership. A minor may become a partner, but this contract like his other contracts, is voidable; yet while in the firm he has the rights of a partner. As against a partner or creditor of the firm he can not withdraw his capital and leave a competent partner to pay the firm debts alone.
13. Can a married woman become a member of a firm?
At common law she could not but in some states by statute she can, or at least can involve her own separate property in such an undertaking.
14. How are partners classified ?
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15. How are the above defined? n.
The general partner is the real partner and is known to the public as a partner, he brings something into the business and expects to share at least in the profits. At the same time he assumes a responsibility for the payment of the firm debts.
The nominal partner is the partner in name. He brings nothing into the concern and is to take nothing from it, simply lends his name, but to the innocent creditor becomes a responsible party. The dormant partner is he who hides away in the hope that creditors of the firm may not discover him and takes no part in the management. He shares in the losses and gains in the same manner as a general partner and brings, in some form, an investment into the firm.
He becomes liable as a copartner when discovered.
Special partners are those, who in compliance with some statute regulation, are permitted to invest a certain sum of money and may only lose ordinarily the amount invested.
In addition to the above there is what is known as the "silent” partner, one whose name is not concealed from the public but who has no voice in the management of the con
16. In what ways may the contract of partnership be made?
Unless the statute of frauds interferes the contract need not be in writing and may even be implied, but good business judgment suggests the carefully written contract known as "articles of copartnership.”
Such articles may be unsealed, or have a seal attached to the signatures thus rendering the contract a “specialty.”
17. What are some of the things that should be set forth in these articles?
The names of the parties, the firm name, the kind and amount of each partner's investment, the proportion in which gains and losses are to be shared, the special duties of each partner, the time during which the firm is to continue in business, the amounts to be drawn on individual account, the salaries, if any, whether the partners shall be permitted to sign as surety or for accommodation of others, etc. In fact, everything material to the business should be most carefully set forth, for this contract as well as other written contracts, is permitted no variation by parol.
18. What is the capital of a firm?
It is the various contributions of property by the partners, and with the exception of the investment of a limited partner, may be in anything essential to the carrying on of the business. The term capital does not strictly apply where a partner only gives time, skill or labor to the business, but may entitle the one who invests any or all of the latter to share in the gains and losses.
19. What is the nature of the ownership of firm property?
It is joint ownership, such an ownership as entitles a partner to a share in the net resources of the firm. In case of a dissolution, after all debts are paid and the remaining property is converted into cash, to have his share; not such ownership as will entitle a partner to take some certain portion of the partnership property and say that it is his exclusively.
20. Is all property used by the firm joint property?
Not necessarily, as a partner may simply give the mere use of something to the firm and retain the title in himself.
21. What is the advantage of such a distinction as the above?
In this, that firm property is first liable for firm debts, hence in case of a firm liability it would be to the advantage of a partner to show a separate ownership of the article in question.
22. What is implied as to property bought with funds belonging to the firm?
That it is firm property even though the title be taken in the name of the one partner purchasing.
23. What is the rule as to real estate?
That unless the deed be made to the partners individually there is not a conveyance of the legal title, but the ones whose names appear shall take the title to the property in trust for the firm. Ordinarily, if real property be bought with firm capital by one of the partners and the deed be made to him alone, he simply holds the property as trustee for the firm.
V24. What is the character of real estate purchased with partnership funds for copartnership purposes?
It is regarded personal property so far only as may be necessary for the payment of debts and the adjustment of the partnership accounts between the members of the firm.
25. What is the advantage of the above rule?
It facilitates settlements, for under these conditions real property may be treated much the same as personal property and firm creditors may have claims satisfied therefrom while a widow's right of dower or an individual creditor's claim against a deceased partner attaches only to the de
cedent's share of the surplus. 5 . 26. Is there any restriction on the choice or use of a firm name?
In the formation of a new firm they may use any name that they choose unless that name would interfere with the rights of some already established firm. By statute in some states the title "& Co.” cannot be used unless it really stands for some one in the firm, and a public record must be kept of the real name of a person represented by an assumed
27. How shall the firm settle disputes arising in the course of business?
In ordinary matters the majority in interest shall rule. This does not imply the admission of a new partner, or a radical change in the business of the firm, since in those cases unanimous consent is required.
Those who oppose a change shall control if on any ordinary question the firm be equally divided. Neither shall the majority be permitted to rule unless they are acting in good faith.
28. What is the scope of a partner's power?
To represent the firm as a general agent within the apparent scope of the copartnership business. Not separately or severally but as a firm, that is, all together.
29. Can a partner ever go beyond this authority?
Yes, if specially authorized by the other partners, or if they have ratified the act.
30. What else may sometimes endow a partner with a special authority?
The usages or customs of trade or the customs of other firms doing a similar business in the same locality.
31. What are some things that a partner may do?
He may make, accept or endorse such negotiable paper as is necessary to properly conduct the business of the firm.
He may borrow money on the credit of the firm, even though he appropriate it to his own individual use, so long as the lender is an innocent party.
He may mortgage or pledge the property of the firm as security for a firm debt.
He may buy or sell for the firm those things which constitute their stock in trade.
He may pay debts of the firm and collect debts due the firm and give and take receipts for the same, and may compromise a debt if acting in good faith.
32. What are some things the partner may not do?
He may not sign as security nor niake nor indorse accommodation paper for others unless specially authorized to do so.
Nor make a contract under seal, confess judgment nor submit a partnership controversy to arbitration.
33. Can a copartner deal on his own private account where it is at variance with the copartnership business?
He cannot. In such case the firm is entitled to treat the transaction as void as to the copartner and claim the benefit therefrom.
34. What is the responsibility of the firm for the wrongful act of a fellow partner?
The firm is liable for the wrongful or fraudulent act of a partner as long as he acts within the scope of the business. This is on the general principle that the partner is an agent of the firm.
35. What is the liability of a general partner for the debts of the firm ?
To the full extent of his individual property but the firm property is first liable for the firm debts.
36. Can a partner be sued separately for a firm debt?
No, but on a judgment against the firm his property may be levied upon, and that too to the exclusion of any firm