Introduction

The commercial law is the legal set of practice that have so many
overlapping issues that most attorneys who practice one will also have
expertise in the other. Commercial law focuses on the sale and distribution of
goods, as well as financing of certain transactions. Commercial law is
primarily regulated by the Uniform Commercial Code which is a model set of
laws regarding the sales of goods, leases of good, negotiable instruments,
and secured transactions. All states have adopted some form of the UCC,
though each state is free to make its own modifications to the laws as it sees
fit. Because many states have modified at least some of the UCC provisions
to fit their needs, it is important to hire a lawyer familiar with the UCC as it
has been enacted in your state. Commercial law provides the rules that
merchants and others involved in commerce must follow as they conduct
business amongst themselves and with consumers. It governs the sales of
goods and services, negotiable instruments, security interests, leases,
principal and agent relationships, contracts of carriage, and much more. In a
broad sense, commercial law also encompasses related issues like business
bankruptcy and tax planning. Because various legal issues may be included
or excluded from the subject of commercial law depending upon how
expansively it is defined, it may be more helpful to consider the matter in
terms of timing. Commercial law covers legal issues that arise prior to the
initiation of a lawsuit. By contrast, once a lawsuit is filed, the same issues are
more properly characterized as litigation. Thus, commercial law attorneys
help their clients negotiate and enter into business deals. Litigation attorneys
help their clients defend their interests in court when deals go bad.
Contingent to the investment of the trade, purposes of the entities involved
& the kind of trade, the supreme conjoint forms of commercial companies in
Oman are: General Partnerships, Limited Partnerships, Joint Ventures and
Limited Liabilities Companies. As per the requirement of this coursework I

would be selecting the General partnerships and Joint Ventures to discuss

about them in detail.
The General Partnership and Joint Ventures
Taking on a partner can energize your small business and give you resources
you wouldnt have by yourself. But a partnership also means you have to
share the business's profits. You should look at the different kinds of
partnerships that benefit small businesses so you can choose the one that
works best for you. In particular, examine whether you want a temporary
partnership for a joint venture or a general partnership for all of your
business endeavors. In order to properly distinguish between a joint venture
and partnership, it helps to start with the definitions and a simple example.
A general partnership is often described as a voluntary association of two or
more people who jointly own and carry on a business for profit. For example,
partners in a law firm who work together to provide legal services for profit.
A joint venture can be described as a business undertaking by two or more
people engaged in a single defined project. The creation of a joint venture is
a question of fact that will be determined by the circumstances. The
necessary elements are: an express or implied agreement; a common
purpose that the group intends to carry out; shared profits and losses; and
each members equal voice in controlling the project. For example, SonyEricsson was a joint venture by the Japanese consumer electronics company
Sony Corporation and the Swedish telecommunications company Ericsson to
make mobile phones. These definitions overlap in certain ways. Both a joint
venture and a partnership consist of co-owners of a business enterprise
sharing the profits and losses. However, typically a joint venture is set up for
one transaction or a series of transactions. Therefore, joint ventures are
generally distinguished from partnerships by being more limited in both
scope and duration. A partnership, on the other hand, ordinarily engages in
an ongoing business for an indefinite period of time. Further, in a joint

venture, it may not be just profit that binds the parties together. Joint
ventures can be formed for specific purposes such as when parties engage in
research and development, which would otherwise be cost prohibitive to do
individually. Nevertheless, these distinctions are not ironclad and a court may
determine a partnership was formed even for a single business transaction.
Objectives of the Coursework Work
In general this coursework though illustrates the different types of
commercial companies in Sultanate of Oman but in particular it will describe
the General Partnerships and the Joint Venture types of commercial
companies having their businesses in Oman. How these two types of
companies are started, how can they carry on with their businesses, what are
the legal requirements for them, how should they follow the commercial laws
of Oman in order to have the smooth and uninterrupted businesses within
the Omani markets, how can they solve their issues, overcome their disputes
and resolve their differences if and whenever they may appear and what if
the rules and regulations are not followed by any one of these two types of
companies. Hence the ultimate objective of this coursework will be to know
understand and very well the formation and running of the General
Partnerships and Joint Ventures tpes of commercial companies in Sultanate of
Oman.
General

Identities,

Formation,

Controlling

and

Insolvency

and

Differences Renovations of the General Partnerships and Joint

Ventures within the Omani Commercial Laws
General Identities and Formation
The Joint ventures and the General partnerships are common forms of legal
structures used by business owners to combine resources, talents, or skills
with another person or business. Often, business owners mistakenly
interchange

the

two

terms

to

define

the

association

with

the

misunderstanding that they are one and the same. Although these legal
arrangements share many similarities there are significant differences

business owners should be aware of when attempting to form an alliance

with another enterprise. Evaluating the pros and cons of each agreement in
advance will empower businesses to make the best strategic decision to help
them achieve their goals. You would form a joint venture to undertake a
specific project for a limited time. You and another business team up to
pursue an opportunity that you couldnt pursue alone. For example, if a
company manufactures a product that might do well in Europe, it could team
up with a company that already has distribution and contacts in Europe and
share the profits from the new venture. The venture would last only as long
as the project remained profitable. When you form a general partnership, the
arrangement is permanent. You share the business in whatever proportion
you agree on, and both partners become involved with all of the ventures,
initiatives and product development efforts of the entire company. Though
you can have a passive partner who merely invests money, that partner has
the right to inquire about the business and raise objections about operations.
You can form a joint venture through an oral agreement, or you can
document the arrangement on paper. Either way, both parties should be
clear about what percentage of the venture each party owns, how the profits
will be split, what amount of investment must come from each partner, how
assets will be split and what responsibilities belong to each partner. On the
other hand the General partners share ownership of a business, not just a
venture. This includes business property, copyrights, equipment, inventory
and vehicles. The partners also share responsibility for taxes and expenses.
You can form a general partnership without a written agreement, but a
contract spells out the rights and responsibilities of each partner and can
protect you in the event of a disagreement. If you dont have a written
agreement and you regularly do business with someone and share the
profits, that person can claim you have a partnership even if you do not think
of it as one. One of the main reasons business owners should be concerned
about the election between a partnership and a joint venture is taxes.
Partnerships are considered pass through tax entities, meaning all of the

profits and losses of the partnership pass through the business to the
partners. The partners then each pay taxes on their share of the profits (or
deduct their share of the losses) on their individual income tax returns.
Depending on the circumstances, joint ventures may be taxed as a
corporation or partnership. Entities that are taxed as corporations are subject
to tax at both the corporate and shareholder levels, commonly referred to as
double taxation. There are positives and negatives to each form of taxation.
One benefit of partnerships is that they offer greater flexibility with regard to
the allocation of gains and losses. For example, you might be able to
structure your partnership so that one partner receives 50% of the gains
generated by the business and 99% of the losses, something that might
benefit the individuals in your group. However, you or others in your group
might not want to report income on your personal returns and would
therefore corporate tax treatment might be better.
Controlling and Insolvency
In Sultanate of Oman although joint ventures have several attributes in
common with general partnerships, still they remain two distinct contracting
vehicles. The primary difference between the two is the overall duration of
the entity. Joint ventures are designed to be temporary vehicles to assist in
the growth of the members. General partnerships are created as long-term
ventures between the partners involved and are not designed for a projectto-project basis. Joint ventures and general partnerships operate according to
the laws and statues of the states of their primary operation as well as the
federal government. As such, it is imperative that all parties formalize the
relationship through a partnership agreement or a joint venture agreement.
This document should include detailed information regarding each member
as well as the investments each party provides to the business operation. For
a joint venture, this document will also include the primary business location
as well as any subsequent locations, the overall nature of the joint venture,
as well as what types of projects and operations will be performed. Lastly,

the agreement should include a list of duties and responsibilities for each
party involved. The LIQUIDATION of a commercial company means winding
up its activities, usually by selling assets, paying liabilities, and distributing
any remaining cash to the partners. The liquidation process usually begins
with the realization (conversion to cash) of noncash assets. Absent
provisions of the partnership contract to the contrary, the losses or gains
from realization of assets are divided among the partners in the incomesharing ratio and entered in their capital accounts. The amounts shown as
their respective equities at this point are the basis for settlement. However,
before any payment to partners, all outside creditors of the limited liability
partnership must be paid in full. If the cash obtained from the realization of
assets is insufficient to pay liabilities in full, an unpaid creditor may act to
enforce collection from the personal assets of any solvent partner whose
actions caused the partnerships insolvency, regardless of whether that
partner has a credit or a debit capital account balance. A partnership is
treated as an entity for many purposes such as changes in partners, but it
may not use the shield of a separate entity to protect culpable partners
personally against the claims of unpaid partnership creditors.
Differences Renovations
Partnerships are collaborative business efforts. Two or more people share
ownership in the company, each contributing to different aspects with longterm profits in mind. Essentially, different individuals have found it beneficial
to have a business partner. In Sultanate of Oman, business partnerships
must be legally declared and filed with the appropriate regional government.
This includes creating and registering a partnership agreement, which
describes individual responsibilities, legal liabilities and business objectives.
The most basic form of business partnership is referred to as a general or
unlimited general partnership. Within a general partnership, all parties are
equally responsible for all debts, liabilities and other business risks.

Examples of this kind of arrangement are common in law firms, medical

practices and real estate agencies. Often, business associates may not want
to expose themselves to the risks and liabilities of an unlimited general
partnership. These issues can be mitigated through a limited partnership
agreement. Limited partners don't have the same degree of control over a
business and its practices, but they also don't share the same level of
exposure to debt or legal liability. The specific rights and responsibilities of
limited partners must be laid out in the partnership agreement. However, the
laws regarding the formation of businesses, including limited partnerships,
vary from state to state. Often, legal restrictions on the actions of limited
partners can make them an unattractive alternative. Joint ventures exist in
between contractual arrangements and limited liability partnerships. As with
contracts, joint ventures are generally short-lived. However, joint ventures
are legal entities that need to be formed and registered like a corporation or
partnership. Why would business associates want to form a joint venture
rather than just sign a contract? Ventures are necessary when the project is
complex enough to require a specific management team or needs its own
operating infrastructure. A contract can't raise capital, but a joint venture
can. Partnerships, whether general or limited, are considered to be passthrough entities for tax purposes. Joint ventures are less consistent;
sometimes they are taxed as a corporation and other times as a partnership.
General partnerships carry more liability exposure than limited partnerships,
and limited partnerships often carry more liability exposure than joint
ventures. The most significant difference is that joint ventures have limited
time horizons compared to partnerships. Another issue to consider in
deciding between a joint venture and partnership is liability. Generally,
partners in a partnership are jointly and severally liable for the partnerships
obligations. This means that every partner is liable for his or her own actions,
the actions of the other partners, and the actions of employees of the
business. In general, the members of a joint venture that is set up as a
separate corporation or limited liability company will only be liable to the

extent of their investment in the corporations stock or their interest in the

LLC. If the joint venture is established by contract (as opposed to a separate
legal entity), then the parties are personally exposed to liabilities incurred
pursuant to the venture, similar to a partnership. A partner in a general
partnership owes a fiduciary duty to the partnership and the other partners.
This includes duties of loyalty, care, and good faith to the other partners and
the partnership. The fiduciary duties of co-ventures are similar to those owed
by a partner in a partnership, although joint ventures are not treated in all
respects as identical with a partnership. For instance, the fiduciary duties of
a member of a joint venture are often deemed finite and tailored to the
business and activities of the venture, while partnership fiduciary duties are
more broadly construed.
Conclusion
We have now come to know that a partnership is a legal association of two or
more persons as co-owners of a business. They share the profits and losses
of the business and may share management responsibilities as well. But, still
we need to know that, joining two companies is a complex process that
requires many decisions about how it will be financed, how the power will be
transferred and shared, how marketing and information systems will be
merged, and how they will deal with layoffs, transfers, and changes in job
titles and work assignments. Business partnerships provide several financial
and operational advantages that are often grouped under umbrella terms
such as economies of scale, efficiencies, or synergies, which generally mean
that the benefits of working together are greater than if each company
continued to operate independently. Some of the advantages may include:
eliminating redundant resources; increased buying power as a larger entity;
increase revenue by cross-selling products to each others customers;
increase market share by combining product lines to provide more
comprehensive offerings; eliminate manufacturing overcapacity; and gain

access to new expertise, systems, and teams of employees who already

know how to work together. But very alarmingly the studies have found that
65 to 85 percent of merged companies actually fail to achieve promised
efficiencies. Bigger is not necessarily better. Part of the problem is that
companies borrow huge sums of money to buy another company and drain
off needed cash to repay the debt and managers are involved in the details
of combining the two entities so they arent doing their jobs. Recent studies
have shown that culture clash, the difficulties in merging two cultures, is a
major factor in failed mergers. A partnership agreement is a written
document that states all the terms of operating the partnership by spelling
out the partners rights and responsibilities. Although not required by law, it
is wise to consult an attorney to develop one. A partnership agreement
addresses many of the potential sources of conflict in advance such as:
division of profits, decision-making authority, expected contributions, dispute
resolution, and provisions for the buying or selling of partnership interests in
case a partner leaves or dies. Joint Venture and Partnership are very famous
business forms. Many big enterprises come together for specific purposes to
form a joint venture and when that purpose is accomplished the venture also
ceases to exist. Partnerships lasts longer because they are not formed with
an intention to complete a particular purpose, but the sole objective of the
partnership is to undertake business and share profits and losses mutually.
When we talk about profits, the profits are calculated at the end of the
venture, for Joint Ventures but the profits of partnerships are determined
annually. Anyhow whatever the case be the honors of the General
Partnerships and Joint Ventures have always to keep in their minds that they
must perform in accordance of the Omani Commercial Laws or otherwise
they might face problems for running their businesses.

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