Articles of Partnership
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Articles of Partnership is a voluntary contract between two or among more than two persons to place their capital, labor, and skills in business with the understanding that there will be a sharing of the profits and losses between/among partners.
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[edit] Parts of Articles of Partnership
Many sections should be included in articles of partnership. Depending on exactly what partnership is being created, some of the components listed below may or may not be used.
[edit] Principal Components of Articles of Partnership
There are many parts that should be included in any articles of partnership. These are:
- Names of included parties - includes all names of people participating in this contract
- Commencement of partnership- includes when the partnership should begin. The date of the contract is assumed as this date, if none is given.
- Duration of partnership - includes how long the partnership should last. It is automatically assumed that the death of one of the contracting parties breaks the contract, unless otherwise stated.
- Business to be done - includes exactly what will be done in this partnership. This section should be very particular to avoid confusion and loopholes.
- Name of firm - includes the name of the business entity.
- Initial investments - includes how much each partner will invest immediately or by installments.
- Division of profits and losses - includes what percentages of profits and losses each partner will receive. If it is not a limited partnership, then there is unlimited liability (each partner is responsible for all partners' debts, including their own).
- Ending of the business - includes what happens when the business winds down. Usually this includes three parts: 1) All assets are turned into cash and divided among the members in a certain proportion; 2) one partner may purchase the others' shares at their value; 3) all property is divided among the members in their proper proportions.
- Date of writing - includes simply the date that the contract was written.
[edit] Common Components of Articles of Partnership
There are also multiple sections which are often included as well in articles of partnership, based on the circumstance. These are:
- Leadership - includes the granting of one partner the rights to manage and administer the business or a specific department.
- Majority management - includes the authorization of a majority of partners to manage the affairs of the entire partnership. This is particularly common where there are numerous partners.
- Annual account - includes provisions to account for, annually, the property and debts of the business.
- Consistent interest - includes the forbidding of any partner to carry out business unrelated to the partnership. This is usually implied in articles of partnership.
- Misconduct expulsion - includes the allowance of expelling partners who commit gross misconduct or becomes insolvent, bankrupt, etc. This is particularly common where there are numerous partners.
- Resolution of dispute - includes the submission of arguments to arbitration.
