A partnership is a business that is owned by two or more people. Partnerships are common in shop ownership, for example, Sam and Jane's Tea Shop, Pete and Sons Mechanics; and in professional practices, such as, dentists, accountants, lawyers and doctors. Many service providers are in partnerships so that they can provide a complete service, for example, different specialists within a veterinary practice.
When setting up a partnership a Deed of Partnership will normally be drawn up. This will lay down all the rules of the business, such as:
If any rules come into question that are not laid out in the Deed of Partnership it is possible to refer to the Partnership Act of 1890. This sets out all the rules and regulations of running a partnership. There is no legal requirement to draw up a Deed of Partnership - it is a good idea if the partners want to avoid disputes, but not necessary. The 1890 Act basically splits everything down the middle. If partners think this is fair, then they may decide not to draw up a Deed of Partnership.
Sleeping partners can be introduced to a partnership but they will have only limited liability. This means that if a business runs up large debts they will only risk losing the money they put into the business, while their personal possessions remain safe. However, they only have limited liability as long as they take no active part in the running of the business. In every partnership there must always be at least one partner with unlimited liability.