Geetha, Joe and Augustine entered a business arrangement to run a large bakery. Geetha and Augustine left their employment to work full time in the new business. Joe retained his job but agreed to help lent RM70,000 to the new business venture. It was agreed that Geetha and Augustine would each be paid a salary of RM5,500 a month and Joe would be paid 4% interest on her loan. The business arrangement was done in writing. It also stated that each of them had invested RM30,000 as capital and that after salaries and interest were paid they would share equally in any profits. A few months later, Joe who has borrowed some money in the name of partnership and had absconded without anyone's knowledge.

Describe if the arrangement between Geetha, Joe and Augustine fulfil the requirements of a partnership and advice the remaining partners as to their liability arising out of Joe's conduct.

Answer:

Issue; whether the arrangement between Geetha, Joe and Augustine fulfills the requirements of a partnership.

Rule; In Malaysia, a Limited Liability partnership possesses characteristics of both partnerships and limited liability companies alike. A limited partner does not have any liabilities within the partnership, and therefore a limited partner's personal assets cannot be used to settle debts owed by the partnership. A general partner will be liable for any debts which may have been incurred by the partnership. A general partner's assets will be used to pay for any debts which the partnership may owe.

Explanation:

Analysis; In order to set up a Limited Liability Partnership in Malaysia, the owners are also required to provide a document describing the general nature of the proposed business. This information is crucial for the determining of the legality of the Limited Liability Partnership. The owners must also provide a list of all partners who will be involved in the ownership and operations the LLP. A minimum of two persons is needed to register the LLP, the business must be lawful for the purpose of making a profit and the agreement must be in accordance with the terms of the LLP. The Partnership Act 1961 provides that; there will be an active partner in the business and management of the partnership; a dormant or sleeping partner; a salaried partner where the firm uses the services of a person for a pay; and a partner by holding out, outside of the world who is also paid.

Conclusion; The arrangement between Geetha, Joe and Augustine fulfills the requirements of a partnership, under the law of Malaysia, where Geetha and Augustine are the general partners, whereas Joe is the limited partner.