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Commercial Partnerships in the Northern Territory

The law relating to partnerships in the Northern Territory provides for only two kinds of partnership to be formed: general partnerships and incorporated limited partnerships. This page deals with partnerships in the NT.

Legislation

The law relating to partnerships in the Northern Territory is contained in the Partnership Act. 

The government body responsible for regulating partnerships (including keeping a register of incorporated limited partnerships) is the Department of Consumer Affairs.

Normal or general partnerships

The Partnership Act defines a partnership as a business arrangement entered into between two or more people for the purpose of carrying on a business with a view to profit.

Normal or general partnerships are the most common kind of partnership and the simplest to create. They are generally used for all partnerships that do not relate to venture capital projects. Partnerships that propose to use venture capital are formed as incorporated limited partnerships.

Normal or general partnerships do not need to be registered with the Department of Consumer Affairs. They do not need to be governed by an agreement in writing between the partners. 

There are guidelines in the Partnership Act for testing whether a partnership exists. For example, the receipt by a person of a share of the profits of a business is prima facie evidence that they are a partner in that business. The fact that parties are holding property in common in a joint tenancy or tenancy in common may also indicate there is a partnership.

Liability of partners in normal or general partnerships

In a normal or general partnership, all of the partners are jointly liable for the liabilities of the partnership, but only to the extent that those liabilities arose whilst they were partners.

Each of the partners is also jointly liable for any losses or injuries caused by the partnership. 

In this regard, each of the partners has the power to bind the partnership to debts and other obligations of a similar nature.

Incorporated limited partnerships

An incorporated limited partnership is a partnership structure that was created to encourage investment in venture capital projects. A venture capital project is a project which has high growth opportunities but may need significant capital to start up. Incorporated limited partnerships are specifically designed so that people can provide venture capital financing without taking on personal liability.

Incorporated limited partnerships are formed upon registration with the Department of Consumer Affairs.

An incorporated limited partnership requires an agreement between partners in writing. The partners form a body corporate, which is a a separate legal entity from the partners.  Generally, an incorporated limited partnership must have at least one limited partner and one general partner, but cannot have more than 20 general partners.

The partners to an incorporated limited partnership can be individuals, companies or other partnerships. Limited partners have no liability for the debts of the partnership.

Limited partnerships

‘Limited partnerships’ are not available in the NT. However, they are available in other Australian jurisdictions. In a limited partnership, certain partners (known as ‘limited partners’) are not jointly liable for the debts of the partnership; instead, their liability is limited to a specified amount. The general partners in a limited partnership remain jointly liable for all partnership debts. 

Dissolving a partnership

Because incorporated limited partnerships have separate legal personalities from their partners, they need to be wound up in accordance with the procedures under the Partnership Act.

Normal or general partnerships can be dissolved in a number of ways such as upon the death or bankruptcy of a partner.  They may also be dissolved after a fixed term if they were established only for a fixed term, or at the end of a particular project or undertaking if it was only established for that project or undertaking.  Finally, a partner to a normal or general partnership can give the other partners notice of their intention to dissolve the partnership.

Taxation of partnerships

Normal or general partnerships do not pay income tax on their income.  Instead, each of the partners pay income tax on their share of the partnership’s income.  The partnership will still lodge a return to prove its income. Incorporated limited partnerships may be taxed either in the same way as normal or general partnerships, or in a similar way to companies. This depends on a number of factors, such as whether the incorporated limited partnership is registered with Innovation Australia for venture capital purposes.

If you require legal advice or representation in any legal matter, please contact Go To Court Lawyers.

Author

Michelle Makela

Michelle Makela is a Legal Practice Director at Go To Court Lawyers. She holds a Juris Doctor, a Bachelor of Science (Psychology) and a Master of Criminology. She was admitted to practice in 2006. Michelle has over 15 years experience in the legal industry, working across commercial litigation, criminal law, family law and estate planning. 

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