PARTNERSHIP

voluntary association of two or more persons for the purpose of managing a business enterprise and sharing its profits or losses. In the usual partnership, each general partner has full power to act for the firm in carrying on its business; thus, partners are at once proprietors and also agents of their copartners. Not only is each partner individually liable to third persons for the obligations incurred for the firm, but each is equally liable for obligations incurred by copartners when they are acting within the scope of the firm's business. If a partner has paid or been required to pay creditors of the firm from personal assets, other partners may be expected to contribute on an equal or some other agreed-upon basis. If copartners have become insolvent, however, this remedy to the problem of unlimited personal liability may be inadequate. The alternative of restricting a partner's liability to third persons on a pro rata basis or of limiting it to the property held in common never gained foothold in the common law. Unlimited personal liability has been one factor restricting the partnership form of business to small enterprises. Unlike the corporation, the partnership is regarded merely as an aggregation of persons doing business under a common name and not as a legal entity separate and apart from its shareholders. The implication of this is that the earnings of the partnership will be taxed only as personal earnings of the partners. Although corporations are usually organized to have perpetual existence, partnerships may be dissolved at any time upon the withdrawal of a partner or upon the death of a partner. Dissolution may be avoided by issuing transferable shares, but this device is not feasible except by a large organization, in which, as in the case of a corporation, operating control can be centralized in a board of managers. Compare limited liability.