HOW TO START A PARTNERSHIP BUSINESS IN NIGERIA
The Partnership Law (2015) of Lagos State, defines Partnership to mean ‘‘the relationship that subsists between persons carrying on a business with the common interest of profit making.” However, in general terms it is a voluntary business association of 2 or a lot of persons, who put together a business with a typical purpose, and the only real aim of the partnership is creating profit. This means that a partnership is relationship in its claim with a separate legal entity. It is no form like an Incorporated Trustee (NGO) or a corporation.
The major distinction between a partnership and a corporation is that partnership does not confer any financial obligation on the partners. However, it’s attainable for every of the partners to be liable with no limit for the debts that is incurred by the opposite partners within the course of their partnership business, unless it is expressly explicit within the partnership agreement on the proportion of every partner’s liability to the partnership business; whereas in a company, there is a financial obligation which every director or members will incur within the course of running the affairs of the corporate.
PARTNERSHIP FORMATION IN NIGERIA
This range of business can be fashioned by a minimum of two to twenty members. This form of business is being regulated by the Partnership Law or Act. By and large, this puts no halt to the fact that the partners can still come up with a Partnership agreement or Deeds of Partnership as regards details on the terms of Partnership.
Furthermore, Section 19 of the Companies and Allied Matters Act, that is CAP.C20 (2004) Laws of Nigeria, stated that: no company, association, or partnership consisting of over twenty persons should be fashioned for the needs of carrying on any business for profit or gain by the corporate, association, or partnership or by the individual members thence, unless it has been registered as a corporation underneath this very Act, or is created in pursuance of another enactment operative in Nigeria. Also, the Section 19(2) (b) of Companies and Allied Matters Act (CAMA) gives an exception to the provision aforementioned. This section implies that the restriction on the formation of a partnership by less than twenty persons doesn’t apply to any partnership for the aim of carrying on practice:
a). As legal practitioners
b). As comptrollers by persons every of whom is entitled by law to apply as associate degree accountant.
FEATURES OF A PARTNERSHIP BUSINESS IN NIGERIA
- The parties must be in agreement to undertake a partnership business.
- The partnership should be done out with a typical purpose.
- The aim of the partnership should be profit creating and sharing.
- Membership is restricted to a minimum number of two and twenty at most, apart from the exceptions as enumerated by S.19(2) CAMA aforementioned.
- The partners are to be agents of the opposite co-partners. This feature is as a result of the common interest.
- Less capital is needed to start up the partnership.
- It involves less formalities during registration
- Obtain a form from the Corporate Affairs Commission regarding reservation of name.
The following is to be in the form and submitted back to the CAC office
- The planned name of the partnership.
2. The whole nature of the partnership business or activities it intends to hold out.
iii. Address of the main office, as well as the business outlets
- If the registration is to be effected by a firm, the form would state the current first names and surnames, status, age, sex, occupation, nationality and residential address of the planned individual partners, and also the company name and registered workplace of such corporation that may be a planned partner however the case may be.
- Date the business would commence
- Passport photograph of each member
vii. Partners would be required to submit the certificates of professional qualification, if it be that the business is professional in nature.
- There would be a name search to determine if it is available. This process could take a period of two weeks or more. If it happens that the name is in use, there would be need for a re – application but if the reverse be the case, then the registration continues.
- It is required that the details of the partners be provided, details such as Passport, address and signature.
A partnership has the foundation to be based on mutual faith and trust in each other. A fiduciary relationship is to be in existence between each partner, as though each of them are trustees and the others are beneficiaries under the trust. The partners get to enjoy the benefit of:
- Honesty alongside full disclosure
- No authorization to make personal profits
- There is the specific duty against conflict of interest between partners
- There is the presence of hierarchy in the management and control
- The Profit-sharing formula is well spelt out.
Partnership incorporates a basis of contract and this makes it attainable for the partnership agreement to expressly state the terms of its termination. The disadvantages of this business are outlined below:
1). There’s typically lack of trust between the partners particularly regarding finance and property
2). Wherever a partner becomes bankrupt or is found to be reprehensively liable of an offence, the goodwill of the business would be affected.
3). Partnership encourages laziness from the partners
4). It creates conflict of interest during managerial decision making
5). The death of a partner could typically have an effect on the fortune of the business;
6). Partners could incur personal liability which can have an effect on different partners put together and severally.
A Partnership can be dissolved in 3 ways:
- Automatic dissolution: This is as a result of unlawful events being carried by one or all members of the partnership. It is stated in the Section 33 of Partnership Law of Lagos State CAP. P1,2015.
- Death, bankruptcy or charge
- Court Proceedings
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