PARTNERSHIPS AND CORPORATIONS.

There are four methods by which individuals may combine for the purposes of trade.

First. As general partners, whereby each partner becomes individually liable for the entire firm indebtedness.

Second. By forming a limited partnership consisting of general and special partners whereby the liability of the former is unlimited and the liability of the latter is confined to the capital contributed.

Third. By forming an association often similar to a partnership and appointing trustees or officers to act for the members thereof, which trustees shall have such powers as may be delegated to them by vote of the members.

Fourth. By organizing a corporation whereby the liability of stockholders is (except under certain conditions) limited by the amount unpaid upon the par value of stock held and the affairs of the company are managed by officers chosen by the stockholders.

A trading corporation and a trading copartnership are in many respects alike; in the one case the object of the company and the amount of capital are set forth in a charter or articles of association, and the other by means of articles of copartnership. A copartnership is an agreement resting upon the laws of contracts and agency. A corporation cannot be entered into unless authorized by the Legislature. A corporation can sue its members and be sued by them as a collective body, — in case of partnership this is not so. Partnerships are generally composed of a few members, and the relationship between the several partners is one of special trust and confidence. Each individual member is impliedly the agent of the other members

in carrying on the general business. A partnership does not have to make annual returns of its affairs to the Secretary of State, which must be done by corporations.

General partnership is used in most cases where there are but few persons interested, and where the business of the partnership can be conveniently handled in such form.

A partnership is a contract between two or more competent persons to contribute their money, effects, labor, and skill, or some or all of them in lawful business, and to divide the profits as may be agreed upon. They have a common interest in all the partnership property, and a personal responsibility in all partnership engagements.

Agreement. The contract of partnership does not require any particular formality, it is sufficient that it be by the voluntary consent of the parties, whether express or implied, but it is safer to have written articles drawn, that there may be no misunderstanding. A partnership, however, in reference to real estate, must be in writing, and a partnership which is to commence more than one year from the time of making the agreement must be in writing. Persons may be partners who propose signing partnership papers, though they never sign them, but if they are not to be partners until they sign such formal articles they will not be partners until that is done.

Where there is no agreement as to their interest, it is presumed that they have an equal interest. If there is no partnership agreement, the partnership may be shown by the books of account, by the testimony of agents, by letters and admissions.

If there is no agreement that the partnership shall continue for a specified time, it is determinable at the will of any one of the parties thereto.

Agency. Each individual partner constitutes the others his agent for the purpose of entering into all negotiations within scope of the partnership business, unless there is some restriction in reference thereto. One partner is bound even by the fraud of the other partners in contracts relating to the af fairs of the company, unless the other party to the contract was a party to such fraud. No private arrangements between part

ners can limit the rights of third parties without notice of the

same.

One person may have property, and another skill, and it may be agreed that one shall have control of the property for the benefit of both, and that there shall be a division of the profits.

One partner may contribute all the money, or all the stock, or all the labor or skill, but to create partners there must be a division of the profits; the criterion of a partnership is par... ticipation of profits. There need not be a sharing of losses, as one may stipulate to be indemnified against losses, but there must be a division of profits. A mere division of gross returns does not constitute partners, as a person may receive a portion of the profits by way of salary. The true criterion seems to be the right to interfere and advise in the management of the busiWhere one party furnished a yard, and another material to manufacture bricks, which were divided, they were not necessarily partners.

ness.

There need not be any joint money, after money capital or stock; there may be partners to dispose of the goods of others. In the absence of any stipulation, the presumption is, that they are to divide profits equally.

Powers. Each partner has the power to manage the ordinary business of the concern, and to bind the partners in the same. He may, for instance, borrow money to purchase goods, etc. The right of one partner to dispose of partnership property is, however, confined strictly to personal effects, and does not extend to real estate held by the partnership. A partner may draw, accept, and indorse bills, notes, and checks in the name and for the use of the firm. One partner may effect insurance, receive money for the firm, may compromise with the debtors or creditors and release debts due to it, and such acts as are within the ordinary scope of the partnership business. As a general rule, each partner has complete right of disposal of the whole partnership interests and is considered as the authorized agent of the firm. A like power exists in respect to purchases upon joint account. One partner has a right to pledge goods of the firm for advances on partnership account. The act of

one partner, though on his private account, and contrary to the private arrangements among themselves, in a matter which would usually have reference to the business of the firm, will bind the partners if made without knowledge of the other party to such arrangement.

A partner has no authority, from his mere relation as partner, to bind the firm as guarantor of the debt of another, or as a party to a bill or note for the accommodation of another.

A release by one partner is a release by all, and a release to one is a release to all.

Neither party has a right to exclude another from an equal share in the management of the concern, or from the possession of the partnership effects, unless such right be agreed upon in the articles of copartnership. The weight of authority is in favor of the power of a majority of the firm, acting in good faith, to bind the minority in the ordinary business of the partnership and when all have been consulted. The powers of either partner, however, may be restricted or enlarged by special agreement.

Diligence. Good faith and reasonable diligence and skill and the exercise of a sound judgment and discretion lie at the very foundation of the relation of a partnership. No partner has a right to engage in any business or speculation which must necessarily deprive the partnership of a portion of his skill, industry, or capital. The object is to withdraw from each partner the temptation to bestow more attention and exercise a sharper sagacity in respect to his own business than the business of the firm. If the partnership suffers from loss from the gross carelessness, negligence, unskilfulness, fraud, etc., of a partner, or from a deviation from partnership articles, he is ordinarily responsible to the other partners for all loss and damage sustained.

Liability. If persons suffer their name to be used in business, or otherwise hold themselves out as partners, they are to be so considered whatever may be their engagements between themselves and other partners. This is to prevent fraud on creditors. Each partner is liable to pay the whole of the partnership debts. The partnership property is a fund for the

payment of partnership debts and the right of a private creditor of either partner is postponed to the right of a partnership creditor. When a person joins a partnership as a member, unless there is a special promise, he does not assume, nor is he bound by the previous debts of the firm.

A minor may contract the relation of partner as he may make any other trading contract, which may possibly turn out for his benefit; this is subject to the right of avoidance by the minor. In case an infant repudiates a partnership agreement he cannot be credited with profits and avoid losses. He must repudiate or stand by the agreement in toto.

Silent or dormant partners are those who, though taking no part in the management of the partnership, participate in the profits, but are not known as partners. They are equally liable when discovered. It is often hard to distinguish between a silent partner and a mere lender of money. If a person is to be repaid his money with such interest or share of the profits as he may have stipulated for, and has a right to an account and to see the books of the borrower, unless such right is expressly excluded by an agreement, he is in effect a lender. If, however, he stipulates for more than this, e. g., for a right to control the business, or the employment of the assets, or if his advance be risked in the business, or forms a part of his capital, he ceases to be a lender and becomes in effect a dormant partner.

Co-owners. Individuals may own property as tenants in common but are not necessarily on that account partners. Coowners are not co-partners.

1. Co-ownership is not necessarily the result of an agreement partnership is.

2. Co-ownership does not necessarily involve community of profits or of loss: partnership does.

3. A co-owner can, without consent of the others, transfer his interest to a stranger: a partner cannot do this.

4. One co-owner is not as such the agent of the others: a partner is.

5. A co-owner has no lien on a thing owned in common for