Full partnership is one of the oldest forms of partnerships. Nowadays it is used infrequently, however, some entrepreneurs still prefer it. Those who decide to organize a full partnership, the constituent documents of which should be prepared in advance, are recommended to familiarize themselves with the rules of registration of the organization.
What is a full partnership
A full partnership is one of the types of business partnerships in which participants enter into an agreement in accordance with entrepreneurial activity. Each participant (or full partner) is fully responsible for the entrusted property, that is, bears unlimited liability.
The Civil Code governs a full partnership, the constituent documents of which indicate the following features:
- are created on the basis of an agreement;
- full partners are required to personally participate in the activities of the organization;
- have the same rights as legal entities;
- The main goal is the implementation of entrepreneurial activity;
- the responsibility of all participants is unlimited.
There are rules for those who want to become a member of a full partnership. According to the law, individual entrepreneurs can become them, like any commercial organization (according to Article 66 of the Civil Code).
When choosing a name for a full partnership, it should be noted that it should contain the words “full partnership” and the names of all participants, or the names of several participants, but then it is necessary to add the words “full partnership” or “company”. An example of a full partnership is the imaginary company “Ivanov and Company”.
Required documents
A full partnership, the constituent documents of which must be provided for registration, is created on the basis of a constituent agreement. In it, the founders determine their participation in the partnership, agree on the distribution of profits and expenses and how to manage the organization.
Each participant is required to sign a memorandum of association, which indicates the following information:
- name that complies with the law;
- location;
- the size and composition of the share capital ;
- the procedure for managing the partnership;
- size, composition and timing of contributions;
- liability for breach of contract.
The memorandum of association has several purposes. It contains paragraphs that determine the relationship between full partners. Moreover, the contract indicates the terms of the partnership with other organizations. Like any document, the contract is drawn up in accordance with the law and must include all clauses. It is in writing, compiled in the form of one document and signed by each participant.
Full partnership name
There is no requirement in the law that the contract should be in the form of a single document. However, this is a prerequisite when providing it for registration. Moreover, when presenting the contract to third parties, it is mandatory to show a single document.
From the moment of signing the contract, participants in a full partnership must fulfill their rights and obligations. However, for third parties, it takes effect only after registration. Registration of a memorandum of association is in accordance with the Law on Registration of Legal Entities. The name must comply with all the rules. An example of a full partnership with the correct name is “Abzal and K.”
Participants Responsibilities
A full partnership, the constituent documents of which were signed by all participants, imposes rights and obligations on them. This is important to know. Participants in a full partnership cannot be members of more than one partnership. By law, they are not allowed to make transactions on their own behalf without the consent of the others. Everyone is obliged to make at least half of his contribution to the capital at the time of registration of the partnership. The remaining part shall be paid by the time specified in the contract. Each partner is obliged to participate in the activities of the organization in accordance with the rules specified in the memorandum of association.
Member Rights
The founders of a full partnership are entitled to leave the partnership earlier than the specified time. In this case, a person must declare his desire for at least 6 months. If a full partnership was created for a certain period, then withdrawal is possible only for a good reason.
A participant may be expelled from the partnership in a judicial proceeding if other participants voted for it. In this case, he is paid the value corresponding to his share in the capital. The shares of retired participants are transferred in succession, but the rest of the comrades must vote for the successor. The composition of comrades can be changed without exception. In this case, the share in the joint capital is transferred to another participant or a third party. For the operation, the consent of the other partners is necessary.
Liquidation of a full partnership
Since a full partnership is highly dependent on each participant, there are many events that can lead to its liquidation. Naturally, the death of a participant is the reason for the termination of the partnership. If the partner is a legal entity, its liquidation will serve as the basis for the liquidation of the organization.
Other reasons are:
- appeal of creditors to one of the participants in order to recover property;
- judicial proceedings against one of the partners;
- recognition of the participant bankrupt.
A general partnership has the right to continue activities if such an item is specified in the memorandum of association.
If the number of participants has decreased to one, then the participant has 6 months to transform a full partnership into a business company. Otherwise, it is subject to liquidation.
What is a limited partnership
Full and limited partnerships differ on several points. A limited partnership, which is also called a limited partnership, differs from a full partnership in that it includes not only full partners, but also investors (limited partners). They take the risk for losses that are associated with the activities of the partnership. Amounts depend on contributions made. Commandists do not take part in entrepreneurial activity. Unlike full partners, investors can be not only individual entrepreneurs and commercial organizations, but also legal entities.
Commandists have the right:
- make a profit according to a share in the share capital;
- require annual reports on the partnership.
There are a number of restrictions applicable to investors. They can not be state bodies, as well as local governments. They have no right to speak on behalf of the partnership, except by proxy.
Production cooperative as a form of collective enterprise
One form of collective entrepreneurship is called a cooperative. A full partnership, in contrast to it, has more restrictions in terms of participants. Participants in a production cooperative cannot be individual entrepreneurs, but they personally work in a cooperative. Each member has one vote regardless of the size of the contribution.
In the civil code, a production cooperative is called an artel, as profit depends on the labor contribution of the participant, and not on his contribution. In the case of a debt, everyone is liable for its repayment in an amount predetermined by the charter.
The advantage of this form of entrepreneurship is that profits are distributed in accordance with the labor contribution. Property is also distributed if the production cooperative has been liquidated. The maximum number of members is not limited by law, which allows the creation of cooperatives of any size. Each participant has equal rights and one vote, which stimulates the interest of members in the activities of the organization.
The minimum number of members is limited to five. The downside is that this greatly limits the possibility of creating a cooperative.