What it is.—Partnership is the relation existing between persons who have agreed to combine their property or skill for the prosecution of a given enterprise, and to share the profits or losses resulting therefrom.

How Formed.—Partnership being a matter of agreement is subject to the law of contracts. When the agreement is in writing, it is called "articles of copartnership." The articles usually specify the parties and the firm name, the nature and the location of the business to be carried on, the investment of each party, the basis for apportioning profits and losses, and sometimes the duration of the co-partnership. There are generally other provisions, their nature depending upon the circumstances.

Responsibility.—As to each other, the partners have the rights and duties which they agree upon.

As to third parties, the two most important rules of law are: first, that the firm is bound by the acts of each member, in matters pertaining to the firm's business; second, each member is liable for all the debts of the firm.

Dissolution.—If the duration of the partnership is not specified, it may be dissolved by any partner at any time. If its duration is specified, it expires, of course, by limitation or by mutual consent. In either case, the death of a partner dissolves the firm. If a partner becomes insane or acts fraudulently, the partnership may be dissolved by a decree of the court. The sale of an interest (which must have the consent of each partner) dissolves the partnership and forms a new one.

Notice of Dissolution.—That the retiring partners may be freed from responsibility for new debts, if the dissolution be by sale of interest (and this is a very common way), notice of the dissolution must be given to the world, and special notice of the fact must be given to those from whom the firm has been in the habit of buying.

Limited Partnership.—In most states, what is called a limited partnership may be formed, whereby the responsibility of some of the partners may be limited to their investment in the business. By this arrangement the private property of the special partners (as they are called) cannot be taken for debts of the firm.

In such a case, however, it is but just, and the law therefore demands, that notice of the fact of limited responsibility be given and that no appearance of responsibility be assumed. To this end it is required: (a) that the articles of copartnership be in writing, and that they be published and recorded; (b) that the amount contributed by the special partners be actually paid in; (c) that the names of the special partners do not appear in the firm name; (d) that they take no active part in the management of the business.

Pertinent Questions.

Why are partnerships formed? May one person invest money while another invests skill? Is a person who receives a percentage of his sales by way of salary a partner?

Why cannot a partner sell his interest without consulting the other members of the firm? Why may the fraudulent act of a partner dissolve the firm? Why does the death of a member end the firm—that is, why not let his heir succeed to his right in the firm as he succeeds to his real estate?

May the private property of a partner be taken to satisfy the debts of his firm? May the firm's property be taken to satisfy the debt of one of its members? Can men dissolve their debts by dissolving their partnership? If one partner continues the business agreeing to pay all indebtedness of the firm, is the retiring partner released from obligation in relation to the debts? Show the justice of each requirement in case of special partners.