The document discusses key aspects of partnership law in India according to the Partnership Act of 1932. It defines a partnership as an association of two or more people carrying on business together with a profit motive. Partners have joint ownership and control over the business. The document outlines types of partners, rights and duties of partners including fiduciary duties, how partnerships are formed, grounds for dissolution, winding up the business, and advantages and disadvantages of the partnership structure.

1. Partnership Act 1932

2. Forms of business
• Sole transaction (one man business, no
sharing of liability, no formalities involved))
• Partnership (based on agreement between
the parties, less formalities involved, good for
small business, liability unlimited)
• Company business( Limited liability,
formalities involved, good for big/large scale
business, corporate personality.)

3. Partnership
• A partnership is “an association of 2 or more
persons to carry on, as co-owners, a business
for profit.”
• Each partner is a co-owner. Partners have
joint control over the business’s operations
and the right to share in its profits.
• A partnership is considered a “general
partnership” unless specifically designated as
a “limited partnership

4. Definition
• Section 4 of the partnership act 1932, _
“Partnership is the relationship between
persons who have agreed to share the profits
of a business carried on by all or any of them
acting for all.”
• “Persons who have entered into partnership
with one another are individually called
‘partners’ and collectively firm-and the name
under which the firm is carried on is called the
‘firm name’.”

5. Partnership Law
• Agency concepts found in partnership law:
– Each partner is an agent of the partnership for the
purpose of conducting the partnership's business .
– Partners have liability for the acts of other
partners that occur in the course of conducting
partnership business.
– Each partner is a fiduciary of the other partners.

6. Partnership Law
• The existence of a partnership is an inference
of law based on established facts, but no
factor alone is determinative. Factors a court
would use in determining whether a
partnership exists:
– Profit sharing (creates presumption of a
partnership)
– Joint ownership of business (but not just joint
ownership of property)
– Right to manage the business

7. Partnership Law
• Duration of partnership: Partnership for a term or
Partnership at will.
• A “joint venture” is a partnership formed for a specific
purpose (e.g. to buy land and develop a retail shopping
center).
• No express agreement is required for a partnership to
exist. Partnership agreements can be oral, but it is
advisable to put an agreement into writing.
• Each partner make a “capital contribution” in exchange
for his “partnership interest” (expressed as a %).
– Contributions may be in the form of cash, time/talent, or
property; additional contributions may be required by the
partnership agreement.

8. Kinds of Partners
• Active or Actual Partner: A person who takes active part, in
the affairs and management of the business is called active
partner. He contributes his shares in the capital and is also
liable to pay the obligations of firm.
• Sleeping Partner: those who merely put in their capital and do
not take active participation. A person who (a) does not
conduct the management of the firm personally (b) is not
known to the outsiders as a partner of the firm, is called
sleeping partner. But he invests his amount in the business and
is liable to clear the debts of the firm. He is also called dormant
partner.
• Silent partner: He is that kind of partner who does not
participate in the affairs of the business but is known to
outsiders as a partner of the firm. He is liable to pay the debts
of the firm like other partner. does not have any voice in the
management.

9. • Partners in profits only: He is an individual who gets a share
of the profits only without being liable for the losses. He does
not participate in the management of the business. He will be
liable to outsiders for all acts of the firm.
• Sub partner: a person with whom one partner agrees to share
his portion of profit. No right & liability The person who
receives a share of profit from one of the regular partners is
called the Sub-Partner. He is not liable to pay the debt is of
the firm. He has no rights and privileges against the firm.
• Limited partner who has not to pay any obligation more than
the share he holds in the firm is liable only up to the value of
his capital contributions in the firm, and the like.

10. • Minor Partner: There is no restriction to join the minor in the
partnership by law. Although he may become partner but
with the consent of all existing partners.
In this case, he can be admitted to the profits of the firm only
but not losses. He is not personally liable for the obligations
of the firm. But minor has the right to inspect and copy .the
accounts of the firm. Within six months of his attaining
maturity, he has to give public notice whether he wants to
remain partner or not. After his decision, he will deemed as
full fledged partner.

11. Kinds of Partners
• Partner by estoppel or holding out: a person who represents
himself as a partner of a firm to third parties though he is not
a partner. On such representation he becomes liable to third
parties if it can be proved that the third party acted on the
faith of his representation. It is irrelevant whether the person
representing knows of such faith or not.
• Nominal Partner : He is not in reality a partner of firm but his
name is used as if he is a member of the firm. He is not
entitled in the profit or loss of the business but he is liable to
all the acts of the firm. The person who has good prestige and
status is given, the position of nominal partner.

12. Rights of the partners
• In the absence of a partnership agreement (oral or
written) The Partnership Act govern the partners’ rights.
• These default rules include:
– Management of partnership: each partner has an equal
voice in management. One vote each--majority wins;
unanimous consent required for some actions.
– Partnership income/losses: equal profits, losses shared
as profits shared.
– Compensation: none.
– Inspection of the books and records.
– A partner can demand an accounting of partnership
assets or profits to determine value of each partner’s
share. May occur when other partner(s) suspected of
committing fraud or embezzlement, or any time it is
just and reasonable.

13. Duties and Liabilities
• Fiduciary duties. Partners are fiduciaries and
general agents of one another and the
partnership. Fiduciary duties include “duty of
care” and “duty of loyalty.”
• General agency powers. All partners have implied
authority to conduct ordinary partnership
business (but may need unanimous consent to
sell assets, enter into debt agreements, or certain
other activities).
• Duty to make contributions to cover losses.

14. Liabilities
• All partners in a general partnership have
unlimited personal liability for the partnership
debts, but the assets of the partnership must be
exhausted first.
• The partnership is liable for the torts committed
by the partnership’s employees and partners for
acts committed within the scope of their business
duties.
• New admitted partner has no personal liability
for existing partnership debts and obligations.

15. Liabilities
• Joint and several liability (majority rule). All
partners are both jointly and severally
(separately) liable for all partnership debts
and liabilities that cannot be satisfied from the
partnership’s assets. A judgment creditor can
attempt to collect the amount due against the
personal assets of any of the general
partners--regardless of their percentage
interest in the partnership.

16. Dissociation
• Dissociation occurs when a partner ceases to be associated
with the partnership’s business. This may occur by:
– A partner voluntarily giving notice of intent to withdraw.
– Occurrence of event specified in the partnership agreement
(such as death).
– By a unanimous vote of other partners.
• A “wrongful” dissociation by a partner may result in liability
to the partnership.
• Upon a dissociation, the partnership must either:
– Buy out the exiting partner’s interest and continue operating; or
- Terminate the partnership and distribute remaining
assets among all of the partners.

17. Termination of Partnership Business
• The termination of a partnership occurs in two
stages:
– Dissolution is the legal “death” of the partnership
(may be triggered by agreement or by a partner
withdrawal), and
– Winding up (collecting and distributing
partnership assets).

18. The grounds of Dissolution
• By Agreement (sec.40)
• Compulsory dissolution (sec.41)
• On the happening of certain contingencies (sec.42)
• By Notice (sec.43)
• Dissolution by court (sec.44)
- Insanity
- Partners parmanent incapacity
- Guilty conduct
- Persistent breach of agreement
- Transfer of whole interest
- Loss

19. Winding up and distribution of assets:
• Partners have no authority to conduct partnership
business after dissolution occurs except to:
– Complete transactions already begun.
– Wind up by collecting and preserving partnership
assets, discharging liabilities, and accounting to each
partner for the value of his share.
• If liabilities are greater than assets, partners are
liable for the losses in the same proportion in which
they shared profits, unless agreed otherwise.
• If one partner does not contribute his share to
cover losses, other partners are liable for his share,
but they have the “right of contribution” against that
partner that didn’t pay.

20. Advantages and disadvantages of
partnership
• Advantages
– Easy to create and maintain; no state formation
documents
– Single level of taxation: partnership does not pay federal
income taxes. Partners report and pay federal income
taxes on their allocated share of partnership income.
– Management flexibility (may designate managing partner)
• Disadvantages
– Partners are personally liable for contracts, torts, and
business debts.
– Financing is difficult to obtain (partner contributions or
debt are generally the only options).