Chapter XXI - Partnerships

  • 1. Defined.
  • 2. Prepare and sign.
  • 3. Silent partners.
  • 4. Nominal partners.
  • 5. Liability.
  • 6. How to dissolve.
  • 7. Notice necessary.
  • 8. A form.

If properly conducted, there is much to commend the management of a business through partners.

Never go into a partnership with a man who puts in his experience against your capital, unless you know him like a brother.

"It lasted about a year," said a man who had done this. "Now the fellow, who has cleared out, has the capital and I have the experience."

A partnership is an agreement between two or more persons to associate for the purpose of carrying on a certain form of business.

Each member of a copartnership must contribute a stated contribution to the establishment of the enterprise, but each need not give the same amount.

Neither is it necessary that the contributions of each to the firm shall be of the same character.

One may contribute a building, another machinery, or material, and still another money.

The shares in the profits are based on the cash values of the different contributions.

The work of the different parties may be estimated as contributions, but in such cases it is better to pay the worker a fixed compensation, and charge this to the expense account.


Never go into a partnership based on a verbal agreement, unless it be for the distribution of fish, game or nuts, when out with a friend for a holiday.

Have the copartnership articles carefully drawn up and signed before you put a cent into the undertaking. A document like this can be appealed to should disputes arise; and should a partner die, his heirs may find it of the greatest value.

The articles should contain:

1. The amount to be contributed by each. 2. The nature of the business. 3. The time which the partnership is to last.

If the time is not specified, a partner may withdraw whenever he pleases.

If the profits are to be equally divided, this should be stated and provided for.


When a man invests money in a business in the management of which he takes no active part, he is said to be a "silent partner."

Such a partner has a share in the gains and he is responsible as the others for the firm's liabilities.

Again, a man may not give money or time to a firm, but is willing, for business reasons, that his name shall appear as if he were in the association. In this case the man is known as a "nominal partner."

Although this man is not entitled to a share in the profits and has no money invested, yet he can be held liable for the debts and other obligations. The reason for this is very plain.

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