General partnership

A general partnership is one of the forms of business entities in the Republic of Croatia. It is a business entity in which two or more persons unite for the purpose of permanently conducting business under a common company name. A member of the partnership can be any legal or natural person, with certain exceptions explicitly stated in the Companies Act (e.g., persons who have been convicted of the criminal offense of financing terrorism or money laundering for the duration of the legal consequences of the conviction, etc.).

Liability of General partnership members

The liability of general partnership members is structured in such a way that each member is jointly and severally liable to the creditors of the partnership with their entire personal assets. Due to this unlimited liability, limited liability companies are more commonly established in Croatia, as their members are not personally liable for the company’s obligations.

Relations between members

The legal relations between the members of a general partnership are regulated by the partnership agreement. This agreement is a contract between two or more persons that defines their mutual relations concerning the establishment and operation of the partnership.

Contributions to the General Partnership

Contributions to the partnership can be in the form of money, goods, rights, labor, or other services or assets. If a member contributes a non-monetary asset (e.g., labor), the members mutually determine its value in monetary terms. Unless otherwise agreed, each member must contribute equal shares. A member cannot dispose of their share in the partnership without the consent of the other members, nor can they reduce their share in the capital without the agreement of the other members.

Management and Representation of the Partnership

Each member has the right and obligation to manage the business of the partnership, although the partnership agreement may transfer management duties to one or more designated members. Business management includes legal actions and all other activities in the interest of the partnership that arise from the common business purpose, including bookkeeping, correspondence, promotion of the partnership, etc. The same rules apply to the representation of the partnership—each member can represent the partnership unless the partnership agreement excludes them from representation.

Rights of General Partnership Members

The rights of partnership members can be divided into management rights and property rights.

Management rights include the right to participate in decision-making, the right to information, and the right to file a member’s lawsuit to enforce membership rights.

Property rights include the right to a share of the profits, the right to reimbursement of expenses and damages incurred in conducting business for the partnership, the right to severance compensation in case of withdrawal or exclusion from the partnership, and the right to a share of the remaining assets after the dissolution of the partnership.

Dissolution of a General Partnership

A general partnership may be dissolved for any of the following reasons: Expiry of the period for which it was established, decision of the members, court ruling, initiation of bankruptcy proceedings against the partnership or one of its members,, death of a member (if specified in the partnership agreement), resignation of a member or a member’s creditor.