2. Section 4 of Indian Partnership Act, 1932,
defines Partnership as
‘voluntary association between persons
who have agreed to share profits or
losses of business carried on by all or
any of them acting for all’.
Persons who have entered into partnership
with one another are called individually
Partners and collectively a Firm.
3. The act does not attach the firm with a legal
personality apart from its partners, except
for the purposes of assessment of Income-
tax.
A firm cannot become a member of another
partnership firm, though its partners can
join any other firm as partners.
6. At least two persons to form a partnership
Maximum of 10 persons in case of banking
business and 20 in other types of business.
If the prescribed maximum is exceeded,
it would become an illegal association .
7. A Partnership firm having members more
than the statutory limit must be registered
under the Companies Act or some other act.
9. Relation of partnership arises from contract
and not from status or by operation of law.
Partners must enter into an agreement,
voluntarily to form a partnership.
Agreement may be express or implied.
Partnership agreement must satisfy all the
essentials of valid contract.
15. 5. LEGAL OBJECT
Agreement must not relate to anything
which is contrary to the provisions of
any law or has expressly forbidden by
law.
16. 6. COMPLIANCE WITH LEGAL
FORMALITIES
Prescribed legal formalities, if necessary for
the agreement to make it enforceable by law
must have been observed.
18. Partnership firm must be constituted to
carry on some lawful business, and the
business must be actually carried on.
An agreement to carry on business in
future will not create partnership.
Sharing of profits need to be distinguished
from sharing of gross returns
19. Example : A and B are joint owners of a house.
They let out the house on monthly rent of
Rs 3000, and share the income from rent
equally.
A and B cannot be taken as partners.
23. Partners in a firm act in both capacities of
an agent as well as principal.
Every partner is an implied agent of the
other partners and of the firm.
A partner has an authority to bind his
Co-partners by his acts done in the ordinary
course of the business of the firm.
24. AGENT & PRINCIPAL
As an agent, a partner can bind by his acts
the other partners.
As a principal, a partner can be bound by
the acts of other partners.
27. Mutual trust and confidence
He must observe utmost good faith in all the
dealings with his co-partners.
He must render true accounts and should
not make secret profits from the business.
29. Every partner is jointly and severally liable
to an unlimited extent for the debts of the
partnership firm.
If the firm’s assets are insufficient to pay
the debts, personal property of each partner
can be attached to pay off the creditors.
