All of the States and Territories of Australia have very similar partnership laws, with three different kinds of partnerships: a normal or general partnership, a limited partnership and an incorporated limited partnership. In Tasmania, these rules are outlined in the Partnership Act 1891. The latter two kinds of partnerships need to be registered with Consumer Affairs and Fair Trading in order to be validly created.
The Partnership Act 1891 defines a partnership to mean a business that is carried on by a group of people in common with a view to make a profit. Normal or general partnerships are the most common kind of partnership. They do not need to have a written agreement or be registered. Instead, whether a partnership exists depends on a series of factors in the Partnership Act 1891. For example, if a person receives a share of the profits of a business carried on with another person, that is evidence a partnership exists. Other relevant factors include, for example, whether any property is held jointly between those persons, and whether gross returns are shared by the partners.
In a normal or general partnership, the partners are jointly liable for all of the debts of the partnership that are incurred while they are a partner. Each of the partners can bind the partnership as its agent; for example, by raising debt for the partnership. The partners can, generally speaking, vary their mutual rights and duties by consent, which may be express or implied.
A limited partnership is a kind of partnership that consists of both general partners and limited partners. The general partners share responsibility for all the debts of the partnership, but have full control over the management of the business of the partnership.
Limited partners cannot take part in managing the business of a partnership and cannot bind the partnership as its agent, but their liability is limited to a specific amount, which is referred to for each partnership in the register of limited partnerships kept by Consumer Affairs and Fair Trading. They must have at least one general partner and at least one limited partner, but generally cannot have more than 20 general partners.
Similar to normal or general partnerships, a limited partnership is not required to have a written agreement, but they do need to be registered with Consumer Affairs and Fair Trading.
Incorporated limited partnerships are a special kind of partnership that are created to encourage investment in venture capital projects (i.e. high growth projects). An incorporated limited partnership can have any number of limited partners but a maximum of 20 general partners (subject to an exception).
They are also required to be registered with Consumer Affairs and Fair Trading in order to be created. However, they must have a written partnership agreement at all times. Furthermore, unlike limited partnerships, limited partners in an incorporated limited partnership have no liability for the debts of the partnership. This is to encourage venture capital investors to invest in the partnership without having to take on debt risk. They cannot take part in the management of the business and they are also bodies corporate, meaning they have a separate legal identity from their partners.
There are specific rules for how a partnership can be dissolved. All partnerships (other than incorporated limited partnerships) are dissolved at the end of a fixed term if they were only established for that term. They will also generally dissolve as a result of the death or bankruptcy of a partner. The Supreme Court of Tasmania can also dissolve a partnership on application by one of the partners in certain circumstances. Incorporated limited partnerships need to be wound up in accordance with the Partnership Act 1891.
Normal or general partnerships are generally not taxed as an entity. Instead, each of the partners in the partnership includes a share of the profits of the partnership in their individual income tax return. The partnership still lodges a return to prove its income.
Certain limited partnerships are taxed in the same way as a company, which may have tax advantages. Because incorporated limited partnerships are generally set up for venture capital projects and may be registered as venture capital limited partnerships, they might be taxed in the same way as normal or general partnerships.