AYB205 – LAW OF BUSINESS ENTITIES
LECTURE 3: INTRODUCTION TO PARTNERSHIPS
Partnership is the relation which subsists between persons carrying on a business in common with a view of
profit. Partnership Act 1891 (Qld) s5(1)
“An association of persons carrying on business as partners or in receipt of ordinary or statutory income jointly,
but does not include a company.” Section 995-1 ITAA 1997
For a Partnership to exist, three (3) elements must be present:
o That the Agreement is between two or more natural persons is a presumption.
o Carrying on of a business…
A ‘business’ is any trade, occupation or profession and it must be an active occupation or
profession continuously carried on.
o … in common …
The business must be carried on by, or on behalf of, all the partners in the relationship.
o … with a view of profit …
The parties must intend to make a profit that is intended to be shared by agreement between
No express contract is required to form a Partnership.
Creating a Partnership
A partnership may be formed either expressly or impliedly.
An objective test can be used to determine whether partnership has been formed or not by looking to:
o The intention of the parties;
o The conduct of the parties;
o Agreement or behavior as to the sharing or otherwise of profits and losses;
o Each parties’ involvement or otherwise in strategic decisions
Where an objective observer would determine the existence of a Partnership, then the rights and obligations of
Every partner is an agent of the firm and the other partners.
Any act done in the usual course of Partnership business by a Partner binds the firm and the other Partners.
o Except where the action undertaken by a Partner expressly breaches a term of the Partnership
Agreement, for example by acting ultra vires whereby personal liability follows.
The authority of individual Partners could be:
o Apparent; or
8 Power of partner to bind the firm
o Every partner in a partnership, other than a firm that is a limited partnership or incorporated limited
partnership, is an agent of the firm and his or her other partners for the purpose of the business of the
partnership, and the acts of every partner who does any act for carrying on in the usual way of business
of the kind carried on by the firm of which the partner is a member bind the firm and his or her
the partner so acting has in fact no authority to act for the firm in the particular matter; …
Partnership Act 1891 (Qld) s8
12 Liability of partners
o Every partner in a firm, other than an incorporated limited partnership, is liable jointly with the other
partners for all debts and obligations of the firm incurred while a partner, …