What you need to know about the law of partnerships

Trust Maanda
Legal Position
A PARTNERSHIP is an agreement between two or more people to enter into a contractual association in which the persons concerned agree to contribute resources, money, labour or skill to a common project and to carry on business with the object of making a profit for their joint benefit.
The agreement must be to pool resources together or contribute skill or labour to an enterprise for a joint benefit and for profit.
A partnership is a business entity as defined in the Companies and other Business Entities Act.
A business entity is among other things, a partnership or any other association of persons, whether corporate or unincorporated, which has a business character.
A partnership agreement does not have to be registered in terms of any law, but may be voluntarily registered in terms of the Companies and Other Business Entities Act.
It may not need to be written, although it is advisable that it be written.
No formal registration is required to create a partnership, though a written partnership agreement is strongly recommended to outline roles, profit sharing, and liability.
No formalities are required for the creation of a partnership and although writing or registration is not necessary the partners may agree to writing as a requirement for the validity.
The essentials of a partnership are as follows: Contribution to the partnership whether goods, money or labour.
The objective must be the making of profit for the joint benefit of the parties concerned the partnership agreement must be lawful, and it is essential that the parties must intend to create a partnership.
All the above must be present in order for the agreement to be a partnership. The purpose must be to make a profit for the benefit of all.
There are two broad categories of partnerships, namely universal partnerships which is a partnership to run any business or carry out any activity as long as it brings profit, and specific partnerships, those being partnerships entered into for the purpose of a particular enterprise- such as partnerships in particular things; partnerships limited to in a specific kind of property or undertaking, partnerships in the exercise of some profession or art and commercial and trading partnerships.
In order for partnership to run, each of the partners bring something into the partnership, whether it be money, labour or skill, that the business should be carried out for the joint benefit of all parties.
Each must bear in mind that the that the object is to make a profit.
Each must devote their effort in ensuring that they realise profit.
A partnership requires that all the partners act in good faith towards each other and the partnership.
It requires utmost good faith and none of the partners must make a secret profit or act in conflict of interest with the partnership business.
All partners are entitled to the management of the partnership business although they may agree that each plays a different role within the partnership.
Each partner must account to the other.
For partnership to be valid, the parties should be in a legitimate contract. The business must be lawful. This requirement is common to all contracts.
Partners are jointly and severally liable for the debts and obligations of the partnership.
This means that if the partnership runs into debt, all the partners are each personally liable to pay that debt. They share the debt in the proportion of their profit-sharing ratio.
If they have equal profit-sharing ratio, they share the debt equally. If a creditor comes against the partnership, any one of them can pay the debt and recover from other partners their respective share of the debt.
A partnership can be dissolved by any means the partners agree on in the partnership agreement.
It may be by death of a partner. It can terminate by one giving notice to the other or by cancellation if there is breach. It can also come to an end if the time agreed for its operation expires or a specific task it was set to perform has been performed.
It is important that the parties agree on what will lead to a termination or dissolution of the partnership and what will happen to the partnership assets in that event.
It is encouraged that an elaborate agreement be written where a partnership is involved.
Business must not be run on trust. It must be run on agreed terms that are easy to identify in the event of a dispute. The agreement should state when and how profits will be shared between the partners and how disputes will be resolved in case they arise.
Trust Maanda is a legal practitioner and a partner at Maunga Maanda And Associates. He writes in his personal capacity. He can be contacted on +263772432646