nerships are formed under common law rules that are the same in every part of the Union. In certain of the western states, however, codes of partnership law, intended to regulate general partnerships, have been enacted. Entirely apart from these general partnership codes, nearly all the states have provided for the organization of partnerships with special or limited partners. The Uniform Partnership Act, prepared and recommended by the National Conference of Commissioners on Uniform State Laws, has been adopted in Maryland, Pennsylvania, Wisconsin, Illinois, Michigan, Wyoming and Ten nessee. Notes: 1. The contract of partnership should always be in 2. writing. The state partnership law should always be consulted in the formation of any partnership, and especially in the case of a limited partnership. § 291. The Firm Name The usual practice where there are two partners is to use both names; the name of the leading partner naturally coming first. If there are more than two partners, all the names may appear, though this is unusual in mercantile partnerships. Usually but one or two names appear, the other names being represented by the addition, "& Co." Professional partnerships on occasion use three and even more names in the firm title. In the absence of statutory restriction any title that is preferred may be used as a firm name, even though it contains no partner's name, for instance, such a name as "The Ansonia Furniture Company." In New York and some other states a firm using any name other than the names of the partners or some of them, must register such "trade-name," together with the real names of the partners, in the county clerk's office, under legal penalty. It is also illegal in New York to use the suffix "& Co." unless it represents existing or former partners. Partners may change the firm name without dissolution or any special formality, or may have more than one name for the firm. All business of the firm should be done under the firm name, although a partnership may exist and be bound without any specific firm name by using the separate names of the partners. The firm signature, as "Herrick, Simpson & Co.," may be written by a partner or by any agent of the firm. If suit is to be brought the names of all the partners must appear in the pleadings. The usual form is "Anselm Cole, Harvey Andrews and James Ellis Jones, partners under the firm name of Cole & Co." § 292. Partnership a Personal Relation It must be remembered that partnership is a personal relation. Such skill and experience as one partner may possess above the others constitute as legitimate a form of investment as any other kind of capital. In many cases these are taken as the full equivalent of the financial investments of other members of the firm. In others, they are regarded as a partial equivalent, and in still others extra abilities are recognized by a special salary or a larger percentage of profits. As partnership is a personal relation and as one reckless partner may bankrupt his associates, the selection of partners is a vital matter. No one can be forced to accept a partner he does not like. So a new partner may not be admitted except with the unanimous consent of the entire firm. Because of the importance of the personnel, the death of one partner will ordinarily dissolve the firm. Note: 1. Partnership is a personal relation and a partner should always be a man who can be trusted. § 293. Classification of Partnerships Partnerships may be roughly divided into two classes, general and special. While this classification covers the majority of cases, there are a few forms involving peculiarities of partnership law, such as limited partnerships and joint-stock companies, which require separate discussion. A general partnership is the usual partnership formed for the continued prosecution of some general line of business. It is the commonest form of partnership. General partnerships may be either trading or non-trading. Trading partnerships include all those formed for the purpose of buying, selling, and manufacturing. Non-trading partnerships do not buy, sell, or manufacture as a principal feature of their business. These partnerships include professional partnerships, firms of brokers, etc. A special partnership is formed for the transaction of some single piece of business, or for the conduct of some one line of business. Examples of special partnerships are as follows: a partnership to buy and sell some definite piece of land, to ship a cargo to some particular place, to buy and operate a threshing machine, to finance and sell a particular patent, or to deal in specified stocks. A common form in the present day is the syndicate organized for the promotion or financing of some large corporate enterprise. Special partnerships are often termed "joint ventures." It is to be noted that a special partnership means one undertaken for a special business, while a special partner simply means a limited partner. A limited partnership may be formed only under special statutes. It differs from the ordinary partnership in that certain of its partners are silent, or inactive, and the liability of these partners is limited to the amount actually invested by them. These partners are called special partners. If a partner whose liability is thus limited takes active part in the conduct of the partnership business, his status changes and he at once becomes liable as a general partner. The restricted liability enjoyed by the special partner can be secured only by strict compliance with the statutory directions. These usually prescribe notice to the public of the formation and nature of the partnership and require that a certificate and affidavit of the limitations of the partnership be filed in some office of public registry. In New York a limited partner must contribute his capital in cash. In all cases the local statutes should be examined, and their directions followed implicitly. In a New York case a limited partner was held by the courts to be in fact liable as a general partner merely because the affidavit-stating that cash had been paid by the limited partner-was filed at a time when he had in fact given only a check dated a few days in advance. A joint-stock company is a form of business organization formerly popular but now practically obsolete. It is not organized under any statute, and, though usually adopting a corporate name and having some of the features of a corporation, is merely a copartnership, and the shareholders are responsible for the debts of the company as in partnership. An important difference between such an organization and an ordinary partnership is that its members may transfer their interests exactly as stockholders do in a corporation. If there are many members, affairs are usually managed by a board of trustees or managers, and the individual members have no authority to act in the company affairs. In New York and some other states various forms of joint-stock companies, partnership associations, and other ambiguous organizations between partnerships and corporations are authorized by statute. These statutes and the deci sions of the state courts construing them must be consulted to ascertain their legal status. REVIEW QUESTIONS I. What is the law as to a minor's becoming a partner? 2. What is a general partner? A limited partner? A dormant partner? A nominal partner? A subpartner? 3. What is a limited partnership? What does your own state law prescribe for the formation of a limited partnership? 5. In the event that the name of a partnership does not clearly indicate who all the principals of the firm are, what is necessary for such a firm to do in order to bring suit? 6. Why should a partnership agreement be written? parties drift into a partnership? 7. What is a special partner? What is a special partnership? 8. What are the peculiarities of a joint-stock company? 9. What matters should be specified in articles of copartnership? 10. Prepare a short form of partnership agreement for equal part ners. II. Prepare a copartnership agreement that shall provide for a period of five years notwithstanding the death of one of the partners in the meantime, and provide also for payment of interest on investments, salaries to partners, and a method of determining and apportioning profits and losses. A buys the share of M in a partnership composed of M, N, and answer. 13. B withdraws by agreement from a firm of which he has been a member, but no announcement is made and he allows his name to be used on the letterhead. The firm becomes insolvent. What is B's position? |