Let us take the case in which the Parties decide to undertake an entrepreneurial activity by setting up a partnership.
What would the general characteristics of such a company be?
First of all, as regards the unlimited and joint liability of the partners:
- in the case of a general partnership, all the partners have unlimited and joint liability;
- in the case of an informal partnership, all the partners have unlimited and joint liability, but there can be an agreement whereby the partners who do not have powers of agency are relieved of such liability;
- in limited partnerships only the working partners are liable, whereas the inactive partners enjoy the benefit of limited liability.
Unlimited liability means that the partners answers for the company’s debts with their present and future assets.
Joint liability instead means that the creditor of the company may, at his discretion, address any of the partners and demand payment for the entire debt from that partner.
Secondly, each partner, as such, has the power of running the company, unless otherwise agreed. An exception is the limited partnership in which the inactive partner cannot have this power.
Finally, a partner cannot transfer his/her quota of participation without the approval of the other partners, both during the lifetime and after the death of the partners. Indeed, if one of the partners dies, except for the inactive partner, his share is not automatically transferred to his/her heirs.
In order for the shares to be transferred, both the heirs and the surviving partners must give their consent.
However, partners can add a clause (called the continuation and consolidation clause) allowing shares to be transferred through a deed while the partners are alive and after their death; seek the professional advice of your notary to help you word this clause appropriately without violating any legal regulations.