Common examples of partnerships are lawyers and accountants. However, many small businesses also use this method of carrying on business. In addition, there are many tax advantages of using a partnership. Legal Status A cardinal principle in partnerships is that the law imposes on each partner a duty to act at all times towards the other partners in a loyal manner and in good faith. In addition, a partner cannot carry on a separate business in competition with the partnership without the consent of the other partners.
Partners carrying on business can sue or be sued in the firm name.
In addition, a person cannot be both a partner and an employee of the partnership. Each partner is an agent of the partnership and of the other partners when acting in the normal course of business of the partnership or in what reasonably appears to be so. Therefore, one partner's action will bind all of the partners. As a result, each partner is personally liable to liabilities, debts, and obligations as a result of the actions of the other partners, regardless of the proportionate capital contribution of the individual parties. As such it is vital in choosing a partner that you trust and are familiar and comfortable with their business practices and ideas.