Russian law provides for a wide range of legal forms of doing business. Among those that are traditionally popular among entrepreneurs - OJSC, JSC. It is also common to carry out activities in the status of IP. At the same time, the Civil Code of the Russian Federation contains provisions that allow Russian businessmen to engage in commercial activities through the establishment of partnerships. Of this type legal form There are two types of businesses: partnerships are full and limited. What is the specificity of each of the noted types of organizations? What are the benefits of doing business in an appropriate legal status?
The essence of the legal form
The Civil Code of the Russian Federation defines a full partnership as a business association, the founders of which, according to the signed agreement, carry out entrepreneurial activities and bear personal responsibility for arising obligations. A citizen may be part of only one partnership of the type in question.
This legal form of business involves creation of a legal entity. A full partnership, therefore, must have an official name. But it can be expressed in different ways. The first option: a name that looks like a listing of the names of all the founders. The second option: an indication of the names of the main or several key participants, as well as the phrase “and company”.
The nuances of the institution process
An economic full partnership is created on the basis of a memorandum of association signed by all participants. This document must meet the criteria defined in Article 52 of the Civil Code of the Russian Federation. In order to establish a partnership, it will be necessary to form share capital - in some way an analog of the charter capital, which is necessary when registering an LLC or JSC. At the same time, the requirements regarding the minimum amount of equity capital are not established in the Russian legislation.
Contract and capital
Unlike LLCs and AOs, a charter is not needed to establish an organization. That is, a full partnership agreement is the only document that is needed to register a business of the corresponding type. The memorandum of association shall include the shares of each partner in the share capital. Also, there are fixed provisions reflecting the specifics of joint business, the rights and obligations of each of the participants, the procedure for the distribution of revenue, etc.
The capital of a full partnership is divided into proportions, which, as we noted above, are determined in the memorandum of association. As a rule, those proportions that are set at the level of distribution of shares determine the following formula for personifying the organization's revenue and losses, but other principles may be reflected in the contract.
Each of the founders must fulfill at least half of their obligations to form an appropriate corporate financial fund by the time the organization is registered. The rest - in the time frames determined by the contract. If one of the partners does not make its part of the share capital on time, it will be obliged to pay penalty interest. A general partnership may be established not only by an individual, but also by organizations.
The structure of the memorandum of association
Consider the features of the structure of the memorandum of association for partnerships. What provisions should be present in it?
A model template for the relevant agreement may include the following points:
- the official name of the organization;
- company location address;
- partnership business management procedure;
- conditions regarding the size and structure of the organization’s share capital;
- information on the size and methods of changing the shares of full partners in the capital of the organization;
- conditions reflecting the size, structure, terms, as well as the procedure for making additional investments by full partners and liability mechanisms for refusing to comply with the relevant requirements;
- information on the total amount of investment contributions to the business.
Thus, the memorandum of association must contain provisions reflecting the fact that the participants undertake to register the organization as a legal entity, determine the procedure for joint business management, create conditions for investments, transfer of property.
It should be noted that under the relevant agreement, the conditions for the distribution of revenue between partners are also fixed, as well as the procedure for participants to leave the organization structure.
The rights of participants in a full partnership
Let's consider what rights for participants in a full partnership are guaranteed by Russian law. Among the key:
- receipt of income, which is calculated in proportion to the share in the organization’s share capital;
- participation in doing business, managing the affairs of the company;
- obtaining the necessary information about the results of the organization, familiarization with the financial statements and other documents related to the activities of the company;
- participation in the distribution of revenue.
Also, full partners are assigned the right to freely leave the company.
Obligations of participants in a full partnership
In turn, full comrades should be prepared to fulfill a number of duties. Among the main ones:
- incur expenses that are proportional to the value of the share in the share capital;
- contribute money to the capital of the company in accordance with the conditions specified in the memorandum of association;
- maintain confidentiality regarding business processes, trade secrets.
It can be noted that in many full partnerships, the memorandum of association contains a provision that the organization’s participants are not entitled to make transactions on their own behalf that repeat the essence of the business, which is the main business for the company.
Consider the specifics of joint business in firms with the appropriate legal status.
Joint business management
A full partnership assumes that each of its founders has an equal number of votes used at meetings, unless otherwise specified in the contract. Each member of the company has the right to study documentation related to business. Also, any person from among the founders can carry out activities on behalf of the whole partnership, unless otherwise specified in the memorandum of association. But it is quite possible that the relevant document will allow only joint conduct of business. In this case, for the conclusion of transactions, the consent of all founders is necessary.
Revenue distribution
If an enterprise created on the basis of such a legal form as a full partnership makes a profit, then it is distributed among the founders of the organization in accordance with the share of everyone in the share capital, unless otherwise specified in the contract.
Similarly, business losses are distributed. If the value of the net assets of the company is lower than the size of the share capital, then the profit is not subject to distribution between the participants in the partnership.
A responsibility
The liability of participants in a full partnership is subsidiary. The founders of the company are responsible for the possible obligations of the organization with their property.Moreover, if the partnership includes a new entrepreneur who was not listed in the founders, then he should be ready to assume part of the existing obligations that arose to the organization in proportion to his share in the share capital.
If the property of a full partnership does not allow, due to insufficient volumes, to pay off the debts of the organization, then the founders must compensate for the corresponding obligations at the expense of personal property in proportion to the shares in the share capital.
Exit from the partnership
Any participant in the partnership has the right to withdraw from the organization by writing a statement. But you need to do this 6 months before the planned exit from the business. However, for good reason, colleagues can allow a person to leave the organization ahead of schedule. A participant who has withdrawn from the partnership shall be paid a share of the property of the company in proportion to that established for him in relation to the share capital, if the agreement does not contain other conditions.
Payment is made in cash (or, if an agreement is reached, in kind). The amount of payments is determined by the balance sheet indicators at the time a person leaves the business. At the same time, the shares of other participants in the partnership are increasing. Each founder of the organization can transfer its share in the joint capital to other colleagues or even third parties, but only with the consent of the other entrepreneurs.
The specifics of limited partnerships
Russian law allows such legal forms of doing business as full and limited partnerships. The main attribute of the former: subsidiary liability of all participants. In turn, in the structure of organizations of the limited category, also called partnerships on faith, subjects with a special status may be present. We are talking about depositor-commandists. These persons are liable only within the limits of their contributions.
Thus, in the composition partnerships on faith there are two groups of participants. Firstly, these are full partners who play a key role in business. Secondly, these are investors who are counting, having invested in business partners, receive income or set as a goal to help them develop business. It can be noted that the commandists, transferring amounts to the business as part of deposits, formalize them in the ownership of the organization. Thus, it is assumed that they fully trust the company. This, in fact, determines the name of the corresponding type of organization, which sounds like "partnership on faith." As soon as the depositor makes the necessary investment amount, a certificate is issued to him confirming this action.
Regardless of what the status of the organization is - limited partnership or full partnership, the description of the legal status of the founders of the company is practically the same. The mechanisms of responsibility are similar, except that in partnerships in faith, they can assume a slightly reduced debt burden due to additional investments from investors. If the commandists withdraw their contributions in the prescribed manner, then in this case the partnership on faith is transformed into a full partnership. But as long as contributions from limited partners are present in the organization’s capital structure, the partnership is called accordingly. Namely: in his company name should be the names of all the founders, as well as the phrase "limited partnership."
Investor Rights
What rights do commandists have? First of all, they can expect to receive part of the company's revenue in relation to their share in the share capital. Also, commandists have the right to freely leave the business - but only at the end of the financial year. Investors can also transfer their share to other business participants in the partnership or to third parties.The consent of the founders of the company is not required. Despite the fact that commandists cannot make key decisions in business, they have the right to get acquainted with the financial documentation of the enterprise.
Regarding such an aspect as liability for obligations, a full partnership should be ready to pay contributions to the partners in the liquidation of the company. However, not as a matter of priority, but only after the founders settle accounts with other creditors.
Liquidation
The considered form of business can be liquidated in court or by virtue of a decision made by the founders. If only one participant remains in the partnership, then he can subsequently transform the organization into another legal form of doing business.
Why are partnerships created?
What is the demand for business in such a legal form as full partnership? The characteristics of companies operating within the framework of this status suggest that all its participants are ready to conduct activities subject to full mutual trust. They should understand that in case of a failed transaction, everyone will be liable. As a rule, such a form of business as full partnership is typical for family enterprises.
As for the standard forms of relationships in business, when partners and counterparties in the general case are not relatives and they are not bound by some common ideological values, then full partnership is not the most demanded legal form. This is mainly due to the fact that the liability of a full partnership for obligations does not have fixed limits.
