Some Basic NJ Partnership Terms to Understand

Glossary of NJ Partnership Terms

A partner: Is an agent, meaning he or she is a legal representative of the partnership and of his or her co-partners, in its business activities. A partner can legally commit a partnership when acting on behalf of the partnership.   A partner’s statements (written or verbal) may be imputed to and be binding upon the partnership.

A general partner: Is the person in the partnership who is actively engaged in the day-to-day operations of the partnership and often assumes the title and represents himself/herself as “general partner” to the public and to creditors.

A silent partner: He or she does not share in the day-to-day operation and management of the partnership’s business and may or may not be known to the public as a partner, thus, the term “silent partner”.

A secret partner may take an active role in the operation of the partnership but is not known to the public in any way as a partner. This “secretness” does not affect his/her liability as a partner for partnership obligations.

Partnership agreement”:  This is the foundation document which sets forth in writing the partners’ rights and obligations, supplemented by NJ law and the NJ Partnership Act.  A partnership agreement technically does not have to be in writing (unless it falls within the Statute of Frauds).

See NJContractLawAttorney.com for a detailed discussion of the NJ Statute of Frauds).

It is always (and I mean always) preferable to place in writing the terms of the partnership agreement in the event of dispute.  Some of the most vicious business disputes involve verbal agreements between partners, shareholders and LLC members when the business relationship deteriorates.

The day-to-day business of a NJ partnership is determined by the terms of the partnership agreement which is binding upon all of the partners.  Decisions affecting the partnership under a partnership agreement are generally made by a majority vote, but among the partners they can agree to decisions being made by more than just a simple majority vote. However, all partners must agree (unless provided for otherwise in the partnership agreement) if partnership property is to be voluntarily subject to claims of creditors, its good will is to be sold, or a claim or liability is to be submitted for arbitration. Any action by an individual partner which would make it impossible to continue the business of the NJ partnership requires unanimous approval of the partners.

Partnership property consists of all things of value contributed at the time of partnership organization or subsequently acquired in the business of the partnership or paid for by partnership funds. Real estate and other property purchased by a partnership in NJ may be acquired in the name of the New Jersey partnership.  

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