What is Partnership?

Legal Definition
A partnership is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations may partner together to increase the likelihood of each achieving their mission and to amplify their reach. A partnership may result in issuing and holding equity or may be only governed by a contract. Partnership agreements can be formed in the following areas:

  • Business: two or more companies join forces in a joint venture or a consortium to i) work on a project (e.g. industrial or research project) which would be too heavy or too risky for a single entity, ii) join forces to have a stronger position on the market, iii) comply with specific regulation (e.g. in some emerging countries, foreigners can only invest in the form of partnerships with local entrepreneurs). In this case, the alliance may be structured in a process comparable to a Mergers & Acquisitions transaction.
  • Politics (or geopolitics): In what is usually called an alliance, governments may partner to achieve their national interests, sometimes against allied governments holding contrary interests, as occurred during World War II and the Cold War.
  • Knowledge: In education, accrediting agencies increasingly evaluate schools, or universities, by the level and quality of their partnerships with local or international peers and a variety of other entities across societal sectors.
  • Individual: Some partnerships occur at personal levels, such as when two or more individuals agree to domicile together, while other partnerships are not only personal, but private, known only to the involved parties.

Partnerships present the involved parties with complex negotiation and special challenges that must be navigated unto agreement. Overarching goals, levels of give-and-take, areas of responsibility, lines of authority and succession, how success is evaluated and distributed, and often a variety of other factors must all be negotiated. Once agreement is reached, the partnership is typically enforceable by civil law, especially if well documented. Partners who wish to make their agreement affirmatively explicit and enforceable typically draw up Articles of Partnership. Trust and pragmatism are also essential as it cannot be expected that everything can be written in the initial partnership agreement, therefore quality governance and clear communication are critical success factors in the long run. It is common for information about formally partnered entities to be made public, such as through a press release, a newspaper ad, or public records laws.

While industrial partnerships stand to amplify mutual interests and accelerate success, some forms of collaboration may be considered ethically problematic. When a politician, for example, partners with a corporation to advance the latter's interest in exchange for some benefit, a conflict of interest results; consequentially, the public good may suffer. While technically lawful in some jurisdictions, such practice is broadly viewed negatively or as corruption.

Partnerships recognized by a government body may enjoy special benefits from taxation policy. Among developed countries, for example, business partnerships are often favored over corporations in taxation policy, since dividend taxes only occur on profit before they are distributed to the partners. However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as shareholders of a corporation. In such countries, partnerships are often regulated via anti-trust laws, so as to inhibit monopolistic practices and foster free market competition. Enforcement of the laws, however, varies considerably. Domestic partnerships recognized by governments typically enjoy tax benefits, as well.
-- Wikipedia
Legal Definition
Contracts. An agreement between two or more persons, for joining together their money, goods, labor and skill, or either or all of them, for the purpose of advancing fair trade, and of dividing the profits and losses arising from it, proportionably or otherwise, between them. 2 Bouv. Inst. n. 1435; Watson on Partn. 1; Gow on Partn. 2; see Civ. Code of Lo. art. 2772; Code Civ. art. 1832; Forbes. Inst. of Scotch Law, part 2, B. 3, s. 3, p. 184; edit. Edin. 1722, 12mo.; Dolmat, Civ. Law, vol. 1, p. 85; 9. John. R. 488; Puffend. B. 5, c. 8; 2 H. Bl. 246; 1 H. Bl. 37; Ersk. Inst. B. 3, t. 3, §18; Tapia, Elemontos de Jurisp. Mercantil, p. 86; 5 Duv. Dr. Civ. Fr. tit. 9, c. 1, n, 17; 4 Pard. Dr. Com. n. 966; 2 Bell's Com. 611, 5th ed.; Aso & Mann. Inst. B. 2, tit.

15. Sometimes partnership signifies a moral being composed of the reunion of all the partners. 4 Pard. n. 966. As a partnership has a separate existence as a person, it becomes liable to fulfil all its engagements, and the partners are individually bound and responsible only on its default, as sureties. 2 Bell's Comm. B. 6, c. 1, n. 4, p. 619, 5th ed.

2. Partnerships will be considered, 1st. In respect to their character and extent, as they regard property. 2d. With relation to the number and character of parties. 3d. As they are divided by the French code. 4th. As to their creation. 5th. As to their object. 6th. As to their duration. 7th. As to their dissolution. 8th. As to partnerships in Louisiana.

3. - §1. In respect to their character and extent, as they regard property, partnerships maybe divided into three classes, namely: universal partnerships; general partnerships; and limited or special partnerships. 1. A universal partnership is one where the parties agree to bring into thefir m all their property, real, personal and mixed, and to employ all their skill, labor, and services, in the trade, or business, for their common benefit. This, kind of partnership is perhaps unknown in the United States. 5 Mason, R. 176.

4. - 2. General partnerships are properly such, where the parties carry on all their trade and business for their joint benefit and profit; and it is not material whether the capital stock be limited or not, or the contributions of the partners be equal or unequal. Cowp. 814. The game appellation is given to a partnership where the parties are engaged in one branch of trade only.

5. - 3. Special partnerships, are those formed for a special or particular branch of business, as contradistinguished from the general business or employment of the parties, or of one of them. When they extend to a single transaction or adventure only, such as the purchase and sale of a particular parcel of goods, they are more commonly called limited partnerships. The appellation is however given to both classes of cases indiscriminately. Story, Partn. §75

6. - §2. When considered in relation to the number and character of the parties, partnerships are divided into private partnerships and public companies. 1. Private partnerships are those which consist of two or more partners for some private undertaking, trade, or business.

7. §2. Public companies are those where a greater number of persons are concerned, and the stock is divided into a considerable number of shares, the object embracing generally public as well as private interests. This term is, however, perhaps loosely applied, as these companies have for the most part the character of private associations. They are either incorporated or not. The incorporated are to be governed by the rules established in their respective charters. See Corporation. The unincorporated are in general subject, to all the regulations of a common private partnership.

8. - §3. In the French law, partnerships are divided into three kinds, namely: 1. Partnerships under a collective name, that is, where the name of the firm contains the names of all or some of the partners.

9. - 2. Partnerships en commandite or in commendam; these are limited partnerships, where one or more persons are general partners, and are jointly and severally responsible with all their estates, and one or, more other persons who furnish a part or the whole of the capital, who are liable only to the extent of the capital they have furnished. The business is carried on in, the name of the general partners. This species of partnership, with some modifica- tions, has been adopted in several of the states of the American union. 3 Kent, Com. 34, 4th ed.; 2 Bouv. Inst. n. 1473, et seq.

10. - 3. Anonymous partnerships are those in which all the partners are engaged in the business, there is no social name or firm, but a name designating the object of the association. The business is managed by syndics or directors. Vide Poth. de Societe, h. t.; 5, Duv. Dr. Civ., Fr. h. t.; Pardes. Dr: Com. h. t.; Code de Com. h. t.; Merl. Repert. h. t. In Louisiana a similar division has been made. Civ. Code of Lo. h. t.

11. - §4. Partnerships are created by mere act of the parties; and in this they differ from, corporations which require the sanction of public authority, either express or implied. Aug. & Ames on Corp. 23. The consent of the parties may be testified, either in express terms, as by articles of partnership, or positive agreement; or the assent may be tacit, and to be implied solely from the act of the parties. An implied or presumptive assent has equal operation with one that is express and determined. And it may be laid down as a general and undeniable proposition, that persons having a mutual interest in the profits and loss of any business, or particular branch of business, carried on by them, or persons appearing ostensibly to the world as joint traders, are to be recognized and treated as partners, whatever may be the nature of the agreement under which they act, or whatever motive or inducement may prompt them to such an exhibition. 1 Dall. 269. 12. A community of property does not of itself create a partnership, however that property may be acquired, whether by purchase, donation, accession, inheritance or prescription. Civ. Code of Louis. art. 2777. Hence joint tenants or tenants in common of lands, goods, or chattels, under devises or bequests in last wills or testaments, and doeds or donations inter vivos, and inheritances or successions, are not partners. Story, Partn. §3.

13. Joint owners of ships are not, in consequence of such ownership, to be considered as partners. Abbot on Ship. 68; 3. Kent, Com. 25, 4th ed.; 15 Wend. 187; and see Poth. De Societe, n. 2; 4 Pard. Dr. Com. n. 969; 17 Dur. Dr. Fr. n. 320; 5 Duv. Dr. Civ. Fr. n. 33.

14.- The free and personal choice of the contracting parties is so essentially necessary to the constituting of a partnership, that even executors and representatives of deceased partners do not, in their representative capacity, succeed to the state and condition of partners; 2 Ves. sen. 34; Wats. on Partn. 6; although a community of interest necessarily exists between them and the surviving partners, until the affairs of the partnership are wound up. 11 Ves. 3. When there is a positive agreement at the commencement of the partnership, that the personaI representative or heir of a partner shall succeed him in the partnership, the obligation will be considered valid. Coll. on part. B. 1; ch. 1, §11; Story, Partn. §5.

15. - §5. The object of the partnership must be legal. All partnerships, therefore, which are formed for any purpose forbidden by law or good morals, are null and void. But all the partners in such a partnership are jointly liable to third persons who may contract with them without a knowledge of the illegal or immoral object of the partnership. Civ. Code of Lo. art.- 2775; 5 B. & A. 341 2 B. & P. 371; 3 T. R. 454; Poth. Oblig. by Evaans, vol. 2, page 3; Gow on Partn. 8; Wats. Partn. 131. Partnerships are not confined to mere commercial trade or business; but generally extend to, manufactures and, to all other lawful occupations and employments, or to professional or other business. They may extend to all the business of the parties; to a single branch of such business; to a single adventure; or to a single thing. But there cannot lawfully be a partnership in a mere, personal office, especially when it is of a public nature, requiring the personal confidence in the skill and integrity of the officer. Story, Partn. §81; Colly. Partn. 31.

16. - §6. Partnerships may be formed to last for life, or for a specific period of time; they may be conditional or indefinite in their duration, or for a single adventure or dealing; this depends altogether on the will of the parties. The period of duration is either expressed or implied, but the law will not presume that it shall last beyond life. 1 Swanst. 521; 1 J. Wils. R., 181. When a particular term is fixed, it is presumed to endure until the period has elapsed; when no term is fixed, it is presumed to endure for the life of the parties, unless previously dissolved, by the acts of one of them, by mutual consent, or by operation of law. Story, Partn. §84. When no time is limited for the duration of a general trading partnership, it is a partnership at will, and may be dissolved at any time at the pleasure of any one or more of the partners.

17. - §7. A partnership may be dissolved in several ways: when the partnership is formed for a single dealing or transaction, it follows that it is at an end so soon as the dealing or transaction in which the partners jointly engaged is completed. Gow on Partn. 268; Inst. Lib. 3, tit., 26, s. 6.

18. Where a general partnership is formed, either for a definite, or an indefinite period of time, the causes which may operate a destruction of it, are various. In the case of a partnership limited as to its duration, it may, in the intermediate time, before the restricted period of its termination arrives, be dissolved either by the death, the confirmed insanity, the bankruptcy of all or one of the partners, or it may endure the stipulated period, and expire with the effluxion of time; but where the partnership is unlimited as to its existence, although in the instances of death or bankruptcy, it is determined, yet if they do not intervene, any partner may withdraw himself from it whenever he thinks proper. Code, lib. 4, t. 37, 1, 5.

19. Besides the causes above stated for a dissolution, a partnership, limited or unlimited as to its duration, may be dissolved by the decree of a court of equity, where the conduct of some or all of the partners has been such as not to carry on the trade or undertaking on the terms stipulated; Gow on Partn. 269; or by the involuntary or compulsory, sale or transfer of the partnership interest of any one of the partners. 17 John. R. 525.

20. In New York, it has been held that there is no such thing as an indissoluble partnership, and that, therefore, any partner may withdraw at any time; and by that act the partnership will be solved; the other party having his action against the withdrawing partner upon his covenant to continue the partnership; 19 Johns. R. 538. This doctrine is not in accordance with the English law. Indeed it is even doubtful in New York. Story, Eq. Jur. §668; Story, Partn. §275; 3 Kent Com. 61, 4th ed.; 1 Hoffm. Ch. R. 534. See Gow on Partn. 803, 305, and 4 Wash. C. C. R. 232.

21. It may also be dissolved by the extinction of the thing or object of the partnership; or by the agreement of the parties. See Civ. Code of Louis. art. 2847 Code Civ. B. 3, fit. 9, c 4 art. 1865 to 1872; 2 Bell's Com. 631 to 6414, 6th ed. See Dissolution.

22. The effect of the dissolution of the partnership is to disable any one of the partners from contracting new obligations or engagements on account of the firm. 1 Pet., R. 351; 3 McCord, 378; 4 Munf. 215; 2 John., 300; 5 Mason, 56; Harper, R. 470; 4 John. 224; 1 McCord, 338; 6 Cowen, 701. But notwithstanding the dissolution there remain, with each of the partners, certain powers, rights, duties, authorities, and relations between them, which are indispensable to the complete arrangement and final settlement of the affairs of the firm. The partnership must, therefore, subsist for many purposes, notwithstanding the dissolution. Among these are, 1st. The completion of an the unperformed engagements of the partnership. 2d. The conversion of all the property, means and assets of the partnership, existing at the time of the dissolution, for the benefit of those who, were partners, according to their respective shares. 3d. The application of the partnership funds, to, the liquidation of the partnership debts. Story, Partn. §324.

23. - §3. By the laws of Louisiana, partnerships are divided, as to their object, into commercial partnerships and ordinary partnerships Commercial partnerships are such as are formed, 1. For the purchase of any personal property, and the sale thereof, either in the same state or changed by manufacture. 2. For buying and selling any personal property whatsoever, as factors or brokers. 3. For carrying personal property for hire, in ships or other vessels. Civ. Code of Lo. art., 2796.

24. Ordinary partnerships are, such as are not commercial; they are divided into universal or particular partnerships. Id. art. 2797.

25. Universal partnership is a contract by which the parties agree to make a common stock of all the property they respectively possess; they may extend it to all the property real and personal, or restrict it to personal only; they may, as, in other partnerships, agree that the property itself shall be common stock, or that the fruits only shall be such; but prop erty which may accrue to one of the parties, after entering into the partnership, by donation, succession, or legacy, does not become common stock, and any stipulation to that effect, previous to the obtaining the property aforesaid, is void. Code Civ. of Lo.art. 2800.

26. Particular partnerships are such as are formed for any business not of a commercial nature. Id. art. 2806. The business of thispartnership must be conducted in the name of all the persons concerned, unless a firm is adopted by the articles of partnership reduced to writing, and recorded as is prescribed with respect to partnerships in commendam. Id. art 2808.

27. There is also a species of partnership which may be incorporated with either of the other kinds, called partnership in commendam, or limited partnership. Id. art. 799. Partnership in commendam is formed by a contract, by which one person or partnership agrees to furnish another person or partnership a certain amount, either in property or money, to be employed by the person or partnership whom it is furnished, in his or their own name or firm, on condition of receiving a share in the profits, in the proportion determined by the contract, and of being liable to losses and expenses to the amount furnished, and no more. Id. art. 2810.

28. Every species of partnership may receive such partners. It is therefore a modification of which the several kinds of partnerships are susceptible, rather than a separate division of partnerships. Vide Bouv. Inst. Index, h. t.: Firm.
-- Bouviers Law Dictionary
Legal Definition
A voluntary contract between two or more competent persons to place their money, efforts, labar, and skill or some or all of them, in lawful commerce cr business, with the understanding that there shall be a proportional sharing of the profits and losses between them. Story, Parin. § 2; Colly. Par,In. § 2; 3 Kent, Comin. 23. Partnershlp is the association of two or more persons for the purpose of carrying on business together, and dividing its profits between them. Civ. Code Cal. § 2395. Partnershlp is a synallagmatic and commutative contract made between two or more persons for the mutual participation in the profits which may accrue fro?h property, credit, skill, or industry, furnished in determined proportions by the parties. Civ. Code La. art. 2801. Partnership is where two or more persons agree to carry on any business or adventure together, upon the terms of mutual participation in its profits and losses. Mozley & Whitley. And see Macomber v. Parker, 13 Piek. (Mass.) 181; Bucknam v. Barnum, 15 Conn. 71; Farmers' Ins. Co. v. Ross, 29 Ohio St. 431; In re Gibb's Estate, 157 Pa. 59, 27 Atl. 383, 22 L. R. A. 276; Wild v. Davenport, 48 N. J. Law, 129, 7 Atl. 295, 57 Am. Rep. 552; Morse v. Pacific Ry. Co., 191 III. 356, 61 N. E. 104.
See also
-- Black's Law Dictionary
Legal Definition
An association of two or more persons, each of whom acting as principal for himself and as agent for the others, combines his property, labor or skill in a lawful enterprise or business for the purpose of joint profit. See 115 Am. St. Rep. 406, note.
-- Ballentine's Law Dictionary