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Unit 2 partnership_act_1932

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Unit 2 partnership_act_1932

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The slides in the presentation talk about the Indian Partnership act 1932. It explains the various types of partners, types of partnerships, rights and duties of partners, minor as a partner, registration and dissolution of partnership firm.

The slides in the presentation talk about the Indian Partnership act 1932. It explains the various types of partners, types of partnerships, rights and duties of partners, minor as a partner, registration and dissolution of partnership firm.

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Unit 2 partnership_act_1932

  1. 1. Indian Partnership Act 1932
  2. 2. Partnership – Definition • Partnership is the relation between persons who have agreed to share profits of a business carried on by all or any of them acting for all • Partners shares losses too [except in some cases]
  3. 3. Essential Elements of a Partnership • The following are the essential elements of a partnership:  An Agreement  Two or more persons  Caring on a Business  Sharing Profits  Unlimited Liability  Mutual Agency
  4. 4. An Agreement • Partnership is a result of an agreement • The agreement may be expressed [written or oral] on implied • E.g. partnership deed is an example of written partnership agreement
  5. 5. Two or more Persons • Partnership must have at least two persons. • Maximum number of persons in a partnership agreement has not been defined in the act • According to the Companies Act 2013, the maximum number of partners in a partnership firm can be 100
  6. 6. Carrying on a Business • For a partnership to exist, it is important that there should be a business • Business includes trade, occupation, profession • It maybe a long term business activity or a short term
  7. 7. Sharing Profits • Partners may share profits according to the proportion that they mutually decide. • However, when there is a loss, the partners have to share the losses too, since losses represent negative profits
  8. 8. Unlimited Liability • Normally, in partnership the partners have unlimited liability • If any of the partner run away after committing an act of fraud, the other partner will be held responsible for the same
  9. 9. Mutual Agency • This means that each partner acts as the agent of other partners • Also, each partner is a principal for he is bound by the acts of other partners
  10. 10. Partner, Firm and Firm Name • Persons who have entered into partnership with one another are individually called partners • Persons who have entered into partnership with one another are collectively called firm • Name under which there business is carried on is called firm name
  11. 11. Nature of partnership firm • The partnership firm doesn’t have a separate legal identity apart form the persons constituting it • It is not a person in the eyes of the law
  12. 12. Types of Partnership
  13. 13. Types of Partnerships • Partnership at will: is formed for an indefinite period of time and can exists on the will of the partners. It can be brought to an end when any of the partners gives notice of his intention to do so • Particular Partnership: particular partnerships is formed for undertaking a particular venture. It comes to an end with the completion of the venture
  14. 14. Types of Partnerships • Limited Liability Partnership: Under the LLP act, partnership with limited liability can be formed. • This gives the advantages of partnership as well as limited liability. The partner can avoid the numerous legal formalities required in case of formation of a company
  15. 15. Types of Partnerships • LLP consists of one or more general partners with unlimited liability and one or more special partners with limited liability • Special partners do not take part in day to day business. Their death or bankruptcy does not dissolve the firm. They cannot withdraw any part of capital contributed to the firm.
  16. 16. Types of Partners
  17. 17. Types of Partners in Partnership • The following are the main type of partners: Active partner or working partner: An active partner is one who participates in the day to day business Sleeping or ‘dormant’ partner: sleeping partner is one who does not participates in day to day business Partner in profits only: A partner who gets a share only in profits but does not share loss.
  18. 18. Types of Partners in Partnership • The following are the main type of partners: Secret Partner: A secret partner is one whose partnership is kept hidden from the public. Limited Partner or silent partner: a partner who has only a limited liability in the firm is called a limited partner. [LLP – Limited Liability Partnership]
  19. 19. Rights of a Partner
  20. 20. Rights of a partner • The following are the important rights of a partner in a firm: Right to take part in a business: every partner has the right to take part in the business Right to be consulted: every partner has the right to be consulted before any decision is taken Right to access accounts: partner has the right to inspect and copy books of the firm
  21. 21. Rights of a partner • The following are the important rights of a partner in a firm: Right to share in profits: partners are liable to proportional share in profits losses Right to use partnership property for business: The partners can use the property of the partnership for business purpose only and not for individual purpose Right to no liability before joining: a person who joins a firm as a partner is not liable for act of the firm before he became partner
  22. 22. Rights of a partner • The following are the important rights of a partner in a firm: Right to interest on Advances: if a partner gives advance to the firm, beyond the amount of capital, he is entitled to receive interest Right to Retire: a partner can retire by i. the consent of all partners ii. By giving notice to the firm in case of partnership at will & iii. According to the terms & conditions of the partnership agreement
  23. 23. Duties of a Partner
  24. 24. Duties of a partner • Partnership is a contract of uberrimae fidea which means that the partners must act in good faith. • The very basis of partnership is mutual trust and confidence • The major duties of a partner are listed as under: To carry on the business to greatest common advantage: a partner must do his best in the business for interest of the firm.
  25. 25. Duties of a partner • The following are the important duties of a partner in a firm: To observe faith: every partner should be honest and faithful towards other partners. He should not derive any private advantage. To attend diligently: every partner must attend his day to day tasks diligently and use his skills to the greatest common advantage of the firm
  26. 26. Duties of a partner • The following are the important duties of a partner in a firm: Not to claim remuneration: a partner should not claim remuneration, he is entitled to share in profit To share losses: a partner is liable to share losses also and not only profits. To use property of the firm only for business purpose: a partner must use firm’s property for business objective only
  27. 27. Duties of a partner • The following are the important duties of a partner in a firm: Not to carry on competing business: a partner should not conduct any business which is competing to firm’s business To act within authority: a partner is bound to act within the scope of his authority. He shouldn’t exceed it.
  28. 28. Minor as a Partner
  29. 29. Minor as a partner Section 30 of Indian partnership act states that though a minor cannot be a partner in a firm, but with the consent of all partners and for the time being, he may be admitted to the benefits of partner through an agreement executed through his guardians. Consent of all partners is important before inducting minor as a partner in a firm
  30. 30. Minor as a partner He is entitled to share in profits. He has the right to inspect the books of accounts only. Minor partner is not allowed to take part in the day to day business On attaining the age of majority, within six months he has to declare whether he wants to continue in the firm or leave the firm
  31. 31. Minor as a partner In case he doesn’t declare anything within six months after attaining the age of majority, it is deemed that he want to remain a partner in the firm
  32. 32. Doctrine of Implied Authority
  33. 33. Doctrine of Implied Authority Implied authority refers to an agent with the jurisdiction to perform acts that are reasonably necessary to accomplish the purpose of an organization. Section 19 of the Indian Partnership act explains the implied authority of partner as an agent of a firm The authority of a partner to carry on the usual business of a firm as is agent is called ‘implied authority’
  34. 34. Doctrine of Implied Authority Implied authority of a partner does not allow him to: Open a bank account on behalf of the firm in his own name Withdraw a case filed on behalf of the firm Acquire immovable property on behalf of the firm Transfer immovable property on behalf of the firm Enter into partnership on behalf of the firm
  35. 35. Registration of Firms
  36. 36. Registration of Firms Registration of firms is done with the registrar of firm [Government of the state] Registration of a firm is not compulsory However, unregistered firms are put to certain disadvantages, thus making it desirable to register a firm A firm may be registered anytime, at the time of formation or afterwards
  37. 37. Dissolution of Firms
  38. 38. Dissolution of Firms Dissolution of firm is the situation in which all the partners of the firm agree to severe [end] their relationship to each other. Dissolution of the firm may happen in two ways: Dissolution without court’s order Dissolution with court’s order
  39. 39. Dissolution Without Court’s order Dissolution without court’s order can happen in the following ways: i. Dissolution by agreement ii. Any event which makes it impossible to carry on firm’s business e.g. unlawful activity iii. On partner’s becoming insolvent iv. On death of a partner / partners v. In case of partnership at will, the firm may be dissolved by serving notices to other partners
  40. 40. Dissolution With Court’s order The court may dissolve the firm in the following cases: i. One or more partners have become of unsound mind ii. The business of a firm cannot be carried on except at a loss iii. In case one or partners sues the firm in the court for an illegal or unlawful activity

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