Chapter 17- Partnerships

Question 1

What statute governs partnerships in Ontario?

Answer 1

The Partnerships Act governs general and limited partnerships in Ontario

Question 2

What is a partnership?

Answer 2

A relationship between two or more persons carrying on business in common with a view to profit. It does not require a written agreement (though advisable).

Question 3

What are the main features of a partnership?

Answer 3

No separate legal personality (partnership is not a distinct legal entity in Ontario).

Partners are agents of each other.

Unlimited personal liability of partners for debts and obligations.

Question 4

What are the indicators that a partnership exists?

Answer 4

Sharing profits (prima facie evidence of partnership).

Participation in management.

Holding out to the public as partners.

Question 5

What are the exceptions where sharing profits does NOT create a partnership?

Answer 5

Payment of a debt by instalments or out of profits.

Remuneration to employees or agents.

Annuities to widows/children of deceased partners.

Loan repayments tied to profits.

Question 6

What is the liability of partners in a general partnership?

Answer 6

Joint liability for debts/obligations of the firm incurred while partners.

Joint and several liability for wrongful acts or misapplications of money/property by a partner.

Question 7

What are the rights of partners under the Partnerships Act (default rules)?

Answer 7

Equal share in profits/losses.

Indemnity for liabilities incurred in ordinary conduct of business.

Right to take part in management.

No entitlement to salary.

Decisions by majority, except changing nature of business requires unanimity.

Access to books and accounts.

Question 8

How can a partnership end (dissolution)?

Answer 8

Expiration of fixed term.

Termination of specific project/venture.

Notice of dissolution by a partner (in partnerships at will).

Death, bankruptcy, or insolvency of a partner.

Court order (e.g., permanent incapacity, misconduct).

Question 9

What are limited partnerships (LPs)?

Answer 9

Governed by Limited Partnerships Act.

Two classes: general partners (manage business, unlimited liability) and limited partners (liability limited to contribution, cannot manage).

Must register declaration with the Ontario government.

Question 10

What is a limited liability partnership (LLP)?

Answer 10

Typically used by professionals (lawyers, accountants).

Partners are not liable for negligence, wrongful acts, or misconduct of other partners.

Still personally liable for own negligence and for firm’s contractual obligations.

Must register as LLP and name must include “LLP.”

Question 11

What duties do partners owe each other?

Answer 11

Fiduciary duties: utmost good faith, disclose information, account for benefits, avoid conflicts.

Cannot secretly make profits or compete without consent.

Question 12

What happens on dissolution of a partnership?

Answer 12

Partnership assets are applied in order:

Pay firm debts to outsiders.

Repay partner loans/advances.

Repay partner capital.

Distribute surplus as profits.