Business structures – Instalment 1 – Sole Trader or Partnership
- August 4, 2015
- Tim Walsh
- No comments
- These are forms of trading or carrying on business in person. The person or persons (if a partnership) is/are personally entitled to all benefits and profits and liable for all activities and losses of the business.
- A partnership is deemed to exist when one or more persons carry on a business activity for a common purpose for profit. A partnership exists in law when these features exist even without a partnership agreement being signed.
- It is desirable that a partnership agreement be signed for the sake of formality and security, and a bank for example would prefer to see a partnership agreement signed and produced.
- A sole trader is obviously personally liable to meet all obligations of the business. The liability of partners is joint and several. This means that one partner acting in the ordinary course of the partnership business binds all of the other partners, who are then also liable.
- A sole trader or a partner should not have valuable personal assets in his/her own name as they would be available for creditors to recover against, or a trustee in bankruptcy.