Partners in a partnership business have differentiated duties & responsibilities with the other partners of the firm. Discuss the legal relation of partners with one another in the light of governing law of partnership

  1. 1.    Introduction:

In today’s world of business there are different kinds or types of  formation for business that people do. Partnership business is one of them. When people want to start a business at first they have to form a company. The legal definition of a partnership is generally stated as “an association of two or more persons to carry on as co-owners a business for profit” (Revised Uniform Partnership Act § 101 [1994]).Partnership business is a type of a business where two or more people collectively come to a mutual decision to work together for a specific goal or purpose for their own interest. The persons who mutually agree to do a business together form a company or firm, which we call a partnership business. In the partnership business the people who participates in this firm for a common goal are call the partners of that partnership business.

 Basically a partnership is an accord where two or more parties(it can be two or more companies) comes in a common decision that they will work together for a common goal or interest to earn profit. For this each of the partners share their own capital, resources, labor or other things to do the business successfully. Partnership laws are different from country to country. In some places definition is also different. In all over the world the number of the partners in a partnership business is not the same. It varies from place to place. In Bangladesh it is defined that to create a partnership it should have to consist of at least two people but it can’t exceed twenty people[1]. Now a day’s people form different kind of partnership for their business because in today’s world of business sometimes it becomes difficult to manage all the resources & to do all the alone for person. Despite from that if two or more people together form a partnership business they can enjoy some kind of benefits like facilities in taxation which they will not be able to enjoy if they work as a single entity.

 Basically governing law of partnership are the provisions of law for partnership where it determines all the aspects of partnership from forming a partnership to its dissolution, responsibilities to its partners, to the third parties, duties of the partners etc[2].

 In this paper I am basically talking about the partnership & the governing law of partnership in context of Bangladesh. For this I am dividing this paper into three major parts. They are:

  1. Types of partnership.
  2. Essential elements of a partnership.
  3. Duties & responsibilities of partners in partnership to each other.

In all these two parts it will contain the duties & responsibilities of the   partners in a partnership business & also the different kinds of effects of a partnership business.

  1. A.   Types of partnership:

Basically there are two types of partnership business in all over the world. Bangladesh also follows these two types of partnership[3]. These are the two basic types of partnership. They are:

  1. General partnership.
  2. Limited partnership.

General partnership:

General partnership is the simplest form of partnership where two or more persons mutually agree to work for a specific goal & for their own interest but it can be created without an agreement. In this partnership each partner is considered as the agent of that firm or that partnership. This partnership causes the unlimited liability & responsibilities for all of the partners. This means all of the partners are equally liable for their firm’s activity. For this sometimes if any partner has any bad intention or some kind of personal intention other partners may have to suffer for that partner’s bad intention. Because other partners are equally liable for their business & they can’t ignore other partner’s liability & have to pay for that. This means if a firm takes loan from any person or other institution & fails to repay the loan to its creditor then that creditor can go to any of that firm’s partner. That creditor can go to any of its partner’s house or business place to take back the loan & the partners have to give or payback the loan because all the partners are equally liable & responsible for their firm’s activity.

 A general partnership can have the following features:

  1. General partnership can be formed by two or more partners.
  2. This partnership can be created by an agreement which is a proof of the existence of that specific firm.
  3. The partners of that firm are all equally liable & responsible for the work of that firm.

Limited partnership:

Limited partnership is another type of partnership which is also popular & seen in all over the world. The term limited partnership itself describes what it is. Limited partnership is a type of partnership where the partners have limited liability. This limited liability is the main difference between general partnership & limited partnership. In limited partnership partners are only liable for their own work. In this partnership one partner is not liable for the work of another partner. But in some countries have law that in limited partnership there should be one partner with unlimited authority this partner is called general partner. The term limited partnership has come into account of business for the term unlimited liability in general partnership, sometimes which has bad impact on those people who are investor & want to invest a huge amount of capital for that business. This term limited partnership is not available in all over the world. We can find this term limited liability in some portions of the business world[4].

 The features of limited partnership are:

  • There are two types of partners in limited partnership. One is general partner & another is special partner. In limited partnership there should have to be at least one general partner who have unlimited authority & that general partner will be responsible for all the activities of that firm. But special partner will not enjoy unlimited authority rather he have some limited liabilities.
  • Special partner will invest only money but will not take any decision of the daily task of that firm.
  • Special partner cannot impose any personal or other decision to the firm or other general partners.
  • Special partners invest their capital in that business in the form of cash.
  • Special partners can’t take back their money in any time they wish. If they do so they make their liability unlimited to that firm.
  • Limited Partnership Company must have to register their company according to the company law of that specific country where they are operating. Firms do this registration to provide the financial information about the firm that special partners contributed to that firm & it also gives idea about the liabilities of the special partners. If a firm is not registered then that firm can be considered as a general partnership firm.
  1. B.   Essential elements of a partnership:

To form a partnership it must consists some ingredients. Without these it can’t be recognize as a partnership. The essential elements to form a partnership are:

  • Every partnership must consist a contract.
  • The reason of the partnership must be legal.
  • The partners should have legal capability to go into in a contract.
  • The intention of the partnership should not reserved secret.
  • There must be joint contribution of money, industry or other capital to a general fund.
  • The purpose must be to acquire financial profits.

        Every partnership must consist a contract:

There are three basics of a partnership which must be compiled with. They are: authority, purpose and reason for its existence. To make an agreement to a proper contract it must be stated clear that what is reason of this partnership that is exists. For this existence of this partnership partners come to a mutual decision to share their money, labor & other capital for the sake of their mutual benefit of the partnership. This contract can be made orally or it can be written. But it is better to make a written contract which helps the firm to legalize them & also to make the duties & responsibilities of the partners clear & precise.

The reason of the partnership must be legal:

The reason of the existence of that partnership must have to legal. Two or more parties can’t do a partnership for an illegal purpose. If they do so that partnership will not be recognize as a legal partnership. The problem of an illegal partnership is if that partnership faces any problem in future & the partners have to go to the court to solve that problem then that court will refuse that matter in excuse of illegal partnership. This will create problems in future.

If the partnership is not a legal partnership then that firm will face problems to get credit from others. An illegal partnership will also face problem for taxation. When a business goes for a partnership then generally they receive some kind of tax benefits which illegal partnership will not be realized. If illegal firms will face any problem regarding their business in future then they will not get any legal help from the government. So it is very important for a business partnership to do the business for a legal reason.

 The partners should have legal capability to go into in a contract:

Only those people who have the legal ability to give approval have the ability to enter into a valid & legal contract. Those people who give taxes regularly have the ability to do a legal or valid partnership.

 The intention of the partnership should not reserved secret:

When a partnership forms the purpose of that partnership should not kept secret. All the partners have the right to know what agreement they made among themselves. There should not any secret clause in that agreement & whenever a partner wants to see that partnership agreement he or she have the right to see that. Because that agreement of partnership decides the duties & responsibilities of all the partners who are in that partnership. So the agreement in which the purpose of that partnership is written must not keep in secret.

 There must be joint contribution of money, industry or other capital to a general fund:

When two or more partners are come into a mutual decision that they will go for a partnership business they share their money, labor & other capital for their mutual benefit. It is the main advantage of a partnership that partners share their resources for a specific goal where they can do some financial profit. The property of a partner can be personal or it can be intellectual or it can be his company’s resource which that partner can use for the benefit of that partnership business.

All the capital which the partners are investing will come to a general or a mutual fund which will be the fund of that firm.

 The purpose must be to acquire financial profits:

Two or more partners join together & do business for some kind of financial profits. Partners share their resources with other partners to gain some kind of financial profits. If there is no financial interest among the partners of a partnership then it can’t be call as a partnership. Basically the financial profits that a firm acquires in business are dividing equally among the partners. But most of the time it depends on the terms of the contract that partners made among themselves. The ownership of the firm will be divide into percentage & the profit is divided among all the partners as they contribute to that partnership.

 Duties & responsibilities of partners in partnership to each other:

In partnership business partners have different duties for their partners among each other & they also have some duties & responsibilities to other people. If these duties not performed perfectly there will be always conflict & misunderstanding will arise among each other, which will hamper the business. These relations with each other & the duties are discussed below:

  • Generally the profit of the partnership business will be divided equally. But most of the time it depends on the agreement that partners mutually agrees that on what clause they will follow. By the terms & conditions of the agreement profit or loss divides among the partners. Partners will not only share the profits, they will also share loss equally according to the agreement.
  • The duties & responsibilities of the partners will be decided according to clauses of agreement. If agreement decides each partner’s role individually then the role of the partners in that business will be according to that agreement. Each partner will have to play their own role.
  • Every partner is an agent of that firm. Whatever they do for their firm it will take as the mutual decision or the decision of that firm.
  • No partner will dominate other partner rather than their respective role. If there is any conflict to take any decision or any other kinds of conflict the majority of the partners will decide that what to do. Whatever decision that majority takes that will be the final decision.
  • Each of the partners will take decision for the betterment the firm. If any confusion or conflict takes place the majority will decide what to do on that matter.
  • Whatever any partner decides on a particular matter for that firm that should be discussed with other partners so that there should not take place any kind of confusion.
  • Every partner should have to look that no personal interest takes place when they are working for the firm. When any partner is working for that firm his main objective should be the best betterment for the firm. If any personal interest takes place on his work, that partner will not be able to take the right decision. If this happens then that particular partner is not working for the firm rather it will be assumed that he is working for something other which will harm the company. If any partner do so then he breach the contract agreement of partnership where it was clearly stated that every partner will work together for a mutual goal.
  • In a partnership other partners can take action to a partner if he breaches the agreement of partnership. For that other partners may take legal action for not maintain his duty properly on behalf of the company which was against the interest of the company.
  • Each of the partners in a partnership will share their money, labor, capital or other resources for a common interest which is the mutual financial profit.
  • If any partner fails to repay the amount of money to its creditor then other partners have to repay that credit. Because each partner are equally liable for their firm.
  • Each partner has the right to check the account of the firm. The account of the firm should have to maintain in a proper & clear tangible way so that whenever any partner want to access it he or she can access it. Each partner should record the right transaction details.
  • Partners should avoid the situations where their own interest takes place & make a conflict between their duties.
  • A partner should not have the right to take any kind of remuneration for the work that he do for his business. Because he will get profit share of that firm. Remuneration are for the employees of the company.
  • If any partner wants to add new partners then he have to take permission from others. The majority will decide that the new person should welcome to the firm as a partner or not. The decision goes to the majority of the partners.
  • There is no separate ending date for ending that partnership. If any partner wants to leave that business he can leave by informing others & by fulfilling other formalities. Other partners can make a new contract if they want to decide that what will happen with the share of that partner.


At the end of this paper I just want to say that in partnership business there are many advantages we can get if we can utilize this concept properly. If all the partners maintains their duties according to the agreement it is a perfect concept to do the business, because day by day the world is becoming smaller & there is also scarce of resources. So if partners work together for a mutual interest & maintain their legal relation properly obviously they will get the benefit.


  6. 2010 California Code Corporations Code Article 4. Relations Of Partners To Each Other And To Partnership(CORPORATIONS CODE
    SECTION 16401-16406)

[1] Partnership Business a form of business organization created through voluntary agreements of minimum two and maximum 20 persons (the maximum is 10 in the case of banking business), with the intention of making and sharing profits among themselves. A partnership can arise only as a result of an agreement or contract, expressed or implied, between the partners. In Bangladesh, a partnership firm is to be formed under the provisions of the Partnership Act 1932.

[2] Unlike corporations whose governing law is a special law – the Corporation Code of the Philippines, partnerships in the Philippines are governed by and covered under Articles 1767 to 1867 of the Civil Code of the Philippines [circa 1950].  These are the provisions of law which govern all aspects of partnerships – from their creation, formation, existence, operation and management to their dissolution and liquidation, including the obligations of the partners to one another, to the public or third persons and to the government.

[3] The partnership law in Bangladesh recognizes two types of partnership: the general partnership, and limited partnership.(

[4] The provisions of the Indian Partnership Act do not recognize limited partnership forms of business and as such these types of business houses are not found in India. These types of business are found the European countries and USA.