The legal relationship between persons who carry on a business, in common, with a view to making profit. A partnership does not have a legal personality separate from that of the partners involved, and the partners are therefore jointly and severally liable for the debts incurred in connection with the partnership business.
Partnership law is set out in the relevant Partnership Act from each state and territory (e.g. Partnership Act 1892 (NSW)). The rules of equity and common law are preserved for partnerships except to the extent of their inconsistency with the Acts.
Partnerships, when compared to other forms of business relationships (such as sole traders, companies, etc.) have their advantages and disadvantages.
The advantages may include:
- Allowing partners to pool business skill and funds
- Inexpensive to establish
- Shared control and responsibility with other partners
- Easy to dissolve
The disadvantages may include:
- Not a separate legal entity (i.e. partners are fully responsible for business debts and liabilities)
- Potential for disputes between partners
- Ownership changes can be complex
- As it is not a separate legal entity, tax is paid by the individuals, not the company