ADMS 2610 Lecture Notes - Limited Liability Partnership, Limited Liability, Sole Proprietorship

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Published on 9 Aug 2012
School
York University
Department
Administrative Studies
Course
ADMS 2610
Professor
Page:
of 3
ADMS2610
Session 7
Chapter 16 (pg. 286-300)
Sole Proprietorship a business where the sole owner is responsible for the
management and the debts of the business
- simplest form of business
- unlimited personal liability
- limited ability to raise capital
- may require registration or license
Partnership a legal relationship between two or more parties for the purpose of
carrying on a business with a view to a profit
- does not include organizations not in business for profit
o charities, social clubs, sports groups
Historical development of Partnership
- originally common law
- it is a mix of common law and statute law today
- most recent development is the “limited liability partnership” or LLP
Nature of a Partnership
- sharing of profits
- contribution of capital
- active participation in management
- part ownership or co-ownership not necessarily a partnership
Difference from Partnership vs. Co-ownership
- Partnership
o contractual
o founded on mutual trust
o partner agent of other partners and the partnership
o partners share in partnership property is always personality
(personal not real property)
o subject to partnership Act
- Co-ownership
o Arises in several ways (succession or inheritance)
o Freely alienable without consent of other co-owner (A & B own a
block of land, A sells his interest to C without B’s consent, now B & C
are co-owners)
o Not an agent of other co-owners
o Co-owners can own any type of property
o Dissolved through disposition of property
Liability (Partnership)
- Liability (persons who form a partnership are collectively called the firm and
business is carried on in the firm name
- Joint and Several Liability
o Partners individually and as a collective group have liability for a debt
of the partnership
o Partners are agents for each other and for the partnership
o Liable for tort of partner if committed in course of partnership
business
o Joint and several liability for business wrongs
Misappropriation
Negligence
Liability (Employees)
- partnership firm is the employer
- partners responsible for direction and supervision of employees
- Liability in tort
o If committed in performance of partnership business
- Liability in contract
o If employee authorized to enter into such contracts
Rights and Duties of Partners
- partnership usually sets out rights and duties
- free to fix such rights and duties
- minimal requirements under Partnership Acts
- property brought into the partnership is partnership property
- Land is held in trust for the partnership
Partnership Act Rules determine partners’ interests, in absence of any express or
implied agreement
- equal share in capital and profits
- Indemnity by the firm for personal payments and personal liabilities
- interest paid on excess capital contributions
- not interest before profits
- every partner may take part in management
- no new partners without consent of others
- no automatic right to remuneration
Dissolution of Partnership
- Dissolution the termination of the partnership relationship
o can be set forth in partnership agreement
o dissolve automatically at end of term set in agreement
o death or insolvency of a partner
o mentally unsound or incompetent
o breach of partnership trust
- Court may dissolve partnership or party may apply to court for dissolution
- Result of Dissolution
o Liquidation of assets
o Determine partners share
o Set order of payment of debts from liquidation is set out in Act and in
partnership agreement
o Must notify customers of firm of dissolution
o Partners liable for debts of partnership during time as a partner
Limited Partnership
- Limited Partner (a partner who may not actively participate in the
management of the firm, but has limited liability
o Limited partner can become a general partner if one takes an active
role in management
o May advise
- General Partner (a full partner with unlimited liability for the debts of the
partnership)
Limited Liability Partnerships a partnership where individual partners are liable
for the general debts of the partnership and for personal negligence but not liable
for the negligence of other partners
- suited to professional practices such as law and accounting
- some provinces have created limited liability partnership legislation
Business Applications
- Joint venture (a business relationship between corporations)
o Can be between two or more corporations or business entities
- Tax advantages (income of a partnership flows through the partnership
without taxation
o Taxed at the hands of the partners individually
Registration of Partnerships
- Requirement of registration
o Varies by province
o Usually requires disclosure of partners name, partnerships name, date
of commencement
o In some provinces partnership cannot defend or institute legal
proceedings if it is unregistered

Document Summary

Sole proprietorship a business where the sole owner is responsible for the management and the debts of the business simplest form of business. May require registration or license limited ability to raise capital. Partnership a legal relationship between two or more parties for the purpose of carrying on a business with a view to a profit. Does not include organizations not in business for profit: charities, social clubs, sports groups. Most recent development is the limited liability partnership or llp it is a mix of common law and statute law today. Nature of a partnership sharing of profits contribution of capital. Part ownership or co-ownership not necessarily a partnership. Partnership founded on mutual trust: contractual, partner agent of other partners and the partnership, partners share in partnership property is always personality (personal not real property, subject to partnership act. Liability (persons who form a partnership are collectively called the firm and business is carried on in the firm name.