Partnership and Co-Ownership

As stated earlier, sharing of profits or gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such person’s partners. Thus, the mere fact that two or more persons own some property jointly and share its income does not mean that they are partners. They are called co-owners. 

For example, sons who inherit some property from the father, are not partners though the property were to be managed jointly and its income shared by them. Such relationship is regarded as co-ownership. If, however, the sons enter into an agreement to run a coffee house in that building and share the income thereof, they will be regarded as partners.

According to Lord Lindley the main points of difference between co-ownership and partnership are as follows:

1. Co-ownership is not necessarily the result of an agreement, but partnership is.

2. Co-ownership does not necessarily involve profit or loss, but partnership does.

3. One co-owner can, without the consent of the others, transfer his interest to a stranger. A partner cannot do this without the consent of all the other partners.

4. A co-owner is not an agent of the other co-owners, but a partner is.

5. A co-owner has no lien on the property owned in common for outlays or expenses nor for what may be due from the others as their share of a common debt, but a partner has.

6. Co-ownership does not necessarily exist for the sake of gain, but partnership exists for no other purpose.

Besides the above differences, a few more points of distinction between the two are also worth noting. These are:

7. In co-ownership there is no maximum limit of co-owners. In partnership the maximum limit of partners is 50.

8. Co-ownership does not necessarily involve carrying on of a business but a partnership does.

9. A co-owner has the right to claim partition of property owned with other co-owners. A partner has no such right. He can simply sue the other partners for the dissolution of the firm and accounts.

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