Obviously, there must be come a time when it is desirable for more than one person to participate in the ownership of business. It may be due to the fact that the amount of capital needed cannot be provided by one person or that the experience and ability required to run the business cannot be found in one person alone. Alternatively, many people just prefer to share the cares of ownership rather than bear all the burden themselves
The form of business organization necessary to provide for more than one owner of a business formed with a view of profit is either that of a limited liability company or of a Partnership.
As West Africa Partnership law is based on United Kingdom law, the basic elements described in this are those of the original United Kingdom legislation, the partnership act 1890. This act of 1890 legislation is applied in all states in Nigeria except for Ogun, Ondo, Oyo and Bendel where the Western Nigeria partnership Act applies. In Ghana, they have Ghanaian incorporated Partnership Act.
Under the U.K Law, a partnership may be defined as an association of two to twenty persons carrying on business in common with a view to making profit. With the exception of limited partners, each partner is liable to the full extent of his personal possession for the whole of the debts of the partnership firm should the firm be unable to meet them. Barring limited partners, each partner would have to pay his share of any such deficiency. A limited partner is one who is registered under the provision of the limited partnership Act of 1907 and whose liability is limited to the amount of capital invested by him; he can lose that but his personal possession cannot be taken to pay any debt of the firm. This partner does not take active part in the management of the business.
Persons can enter into partnership with one another without any form of written agreement. It is, however, wiser to, have an agreement drawn up by a lawyer, as this will tend to lead to a fewer possibilities of misunderstandings and disagreements between partners. Such partnership deed or article of partnership contains thus;
(1) The capital to be contributed by each partner.
(2) The ratio in which profits or losses are to be-shared.
(3) The rate of interest if any to be given on capital before profits are shared.
(4) The rate of interest, if any, to be charged on, partners’ drawing.
(5) Salaries to be paid to partners.
Rate in which profits are to be shared
Here, profit or loss can be shared either equally or in the ratio in which capital is contributed. These are on the basis of agreement between the partners.