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PARTNERSHIP
ACT,1932
Define Partnership
■ Term “Partnership” is defined in Section 4 of Indian Partnership
Act as Partnership is the relation between persons who have
agreed to share the profits of a business carried on by all or, any
of them acting for all.
■ The analysis of this section reveals that the partnership is the
business relationship between two or, more persons who agreed
to share profits of their joint venture.
■ Individuals entered in partnership is called "PARTNERS” &
Collectively they are called a “FIRM”.
■ E.g..-A & B bought 100 packets of cotton.They agreed to sell
the cottons for their joint account and share the profits. Here, A
& B are partners in respect of such cotton business.
Essential Elements of
Partnership
1.Association of two or, more persons:
As far as maximum number of partners in a firm is concerned
partnership act is silent.
2.Agreement between the persons:
Acc. to Sec 5, the relation of partnership arises from contract
and not from status.
The agreement of partnership may be express or, implied.All
essential elements of a valid contract must be present in
partnership.
3.Business:
Sec. 2 (b) says that the term business includes every trade,
occupation or, profession.Thus, association created primarily for
charitable or, social purpose is not regarded as partnership.
4.Sharing of Profits:
Agreement to share profits implies sharing of losses too. Joint
owners in property is not a partner.
5.Business carried on by all or, any of them acting for all:
Partnership is governed by mutual relationship amongst the partners.
Thus, a partner is both an agent and a principal.
The sure test of partnership is the element of ‘mutual agency’ rather
than ‘sharing of profits’.
Types of Partnership
 On Basis of Duration
a)PartnershipAtWill
b)Partnership for a fixed period
 On Basis of Extent of Business
a)Particular Partnership
b)General Partnership
Partnership atWill
[Sec.7 read with Sec.43)]
■ When there is no provision in partnership
agreement (known as partnership Deed, if in
writing) for:
– The duration of their partnership, or
– The determination of their partnership,
then the partnership is called ‘Partnership at
Will’.
 Special feature of ‘Partnership at will’ is that
such firm may be dissolved by any partner by
giving a notice in writing to all other partners of
his intention to dissolve the firm
Cont.
■ The firm will be dissolved from that date which is
mentioned in the notice as the date of dissolution
and if no date is mentioned then from the date of
communication of notice.
Particular Partnership
[sec. 8]
■ When a partnership is formed for a
■ Specific venture or undertaking, or
■ Particular period (fixed term)
then such partnership is called a ‘particular
partnership’.
■ Such partnership comes to an end on the completion
of the venture or the expiry of time period.
■ Mutual consent of all the partners.
■ If such partnership is continued after the expiry of
term or completion of venture, it is deemed to be a
partnership at will.
■ A particular partnership may be dissolved before the
expiry of the term or completion of the venture.
Advantages of Partnership
Firm
■ Easy to form: Like sole proprietorships, partnership
businesses can be formed easily without any compulsory legal
formalities. A simple agreement or partnership deed, either oral or in
writing, is sufficient to create a partnership.
■ Availability of large resources: Since two or
more partners join hands to start a partnership business, it may be
possible to pool together more resources as compared to a sole
proprietorship. The partners can contribute more capital, more effort
and more time for the business
■ Sharing risks: In a partnership firm all the partners “share”
the business risks. For example, if there are three partners and the firm
makes a loss of Rs.12,000 in a particular period, then all partners may
share it and the individual burden will be Rs.4000 only. Because of this,
the partners may be encouraged to take up more risk and hence expand
their business more.
Disadvantage of Partnership
Firm
 Unlimited liability: All the partners are jointly liable for the debt
of the firm. They can share the liability among themselves or any
one can be asked to pay all the debts even from his personal
properties depending on the arrangement made between the partners.
 Uncertain life: The partnership firm has no legal existence
separate from it’s partners. It comes to an end with death,
insolvency, incapacity or the retirement of a partner. Further, any
unsatisfied or discontent partner can also give notice at any time for
the dissolution of the partnership.
 No transferability of share: If you are a partner in any firm,
you cannot transfer your share or part of the company to outsiders,
without the consent of other partners. This creates inconvenience for
the partner who wants to leave the firm or sell part of his share to
others.
Partnership deed
 A partnership is formed by an agreement. This
agreement may be in writing or oral, though the law
does not expressly require that the partnership
agreement should be in writing, it is desirable to have
it in writing in order to avoid any dispute with regard
to the terms of the partnership. The document which
contains the term of a partnership as agreed among the
partners is called “partnership deed”.
 The partnership Deed is to be duly stamped as per the
Indian Stamp Act, and duly signed by all the partners
Contents of partnership Deed
A partnership deed may contain any matter relating to the
regulation of partnership but all provisions in the deed
should be within the limits of Indian Partnership Act, 1932.
However, A Partnership Deed should contain the following
clause:
 Nature of business
 Duration of partnership
 Name of the firm
 Capital
 Share of partners in profits and losses
 Bank Account firm
 Books of account
 Powers of partners
 Retirement and expulsion of partners
 Death of partner
 Dissolution of firm
 Settlement of disputes
Mutual rights and liabilities -
■ a) a partner is not entitled to receive remuneration for taking
part in the conduct of the business;
■ b)The partners are entitled to share equally in the profits
earned, and shall contribute equally to the losses sustained by
the firm.
■ c)Where a partner is entitled to interest on the capital
subscribed by him such interest shall be payable only out of
profits.
■ d) a partner making, for the purposes of the business, any
payment or advance beyond the amount of capital he has
agreed to subscribe, is entitled to interest thereon at the rate of
six per cent, per annum
■ f) a partner shall indemnify the firm for any loss caused to it by
his willful neglect in the conduct of the business of the firm.
■ e)The firm shall indemnify a partner in respect of payments made
and liabilities incurred by him.
■ i) In the ordinary and proper conduct of the business, and
■ ii) In doing such act, in an emergency, for the purpose of
protecting the firm from loss as would be done by a person of
ordinary prudence, in his own case, under similar circumstances
and
Cont.
POSITIONOF MINOR
■ Sec.30(1),A person who is minor according to law to which he is
subject may not be a partner in a firm but with the consent of
all partners, he may be added to the benefits of partnership.
■ RIGHTS:
■ Right to receive agreed share of profits
■ Have access to accounts of firm.
■ If share in profits not given can sue.
LIABILITIES OF MINOR
■ Only to the extent of share in profits(not personally liable)
■ OnAttaining Majority:
Within 6 months he should give notice whether he is joining the
partnership firm or, not; else automatically he enters into
partnership.
TYPES OF PARTNERS
1.Active Partner
2.Sleeping or, Dormant or, Secret Partner
3.Nominal Partner: Neither contribute to capital nor, takes a share
of profit nor, takes in the management. His name is landed for
goodwill but, he is liable to the third party.
4.Partners in Profit only
.5.Sub-partners-When a partner shares his profit with a third person,
such third person is Sub-partners.
6.Partner by holding out or, by estoppel: Partner by representation only
not entered by agreement.
7.Working Partner: Can merely be an employee, although he is entitled
to share the profits as remuneration for the service rendered by him.
THANK
YOU

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Partnership act,1932

  • 2. Define Partnership ■ Term “Partnership” is defined in Section 4 of Indian Partnership Act as Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or, any of them acting for all. ■ The analysis of this section reveals that the partnership is the business relationship between two or, more persons who agreed to share profits of their joint venture. ■ Individuals entered in partnership is called "PARTNERS” & Collectively they are called a “FIRM”. ■ E.g..-A & B bought 100 packets of cotton.They agreed to sell the cottons for their joint account and share the profits. Here, A & B are partners in respect of such cotton business.
  • 3. Essential Elements of Partnership 1.Association of two or, more persons: As far as maximum number of partners in a firm is concerned partnership act is silent. 2.Agreement between the persons: Acc. to Sec 5, the relation of partnership arises from contract and not from status. The agreement of partnership may be express or, implied.All essential elements of a valid contract must be present in partnership.
  • 4. 3.Business: Sec. 2 (b) says that the term business includes every trade, occupation or, profession.Thus, association created primarily for charitable or, social purpose is not regarded as partnership. 4.Sharing of Profits: Agreement to share profits implies sharing of losses too. Joint owners in property is not a partner. 5.Business carried on by all or, any of them acting for all: Partnership is governed by mutual relationship amongst the partners. Thus, a partner is both an agent and a principal. The sure test of partnership is the element of ‘mutual agency’ rather than ‘sharing of profits’.
  • 5. Types of Partnership  On Basis of Duration a)PartnershipAtWill b)Partnership for a fixed period  On Basis of Extent of Business a)Particular Partnership b)General Partnership
  • 6. Partnership atWill [Sec.7 read with Sec.43)] ■ When there is no provision in partnership agreement (known as partnership Deed, if in writing) for: – The duration of their partnership, or – The determination of their partnership, then the partnership is called ‘Partnership at Will’.  Special feature of ‘Partnership at will’ is that such firm may be dissolved by any partner by giving a notice in writing to all other partners of his intention to dissolve the firm
  • 7. Cont. ■ The firm will be dissolved from that date which is mentioned in the notice as the date of dissolution and if no date is mentioned then from the date of communication of notice.
  • 8. Particular Partnership [sec. 8] ■ When a partnership is formed for a ■ Specific venture or undertaking, or ■ Particular period (fixed term) then such partnership is called a ‘particular partnership’. ■ Such partnership comes to an end on the completion of the venture or the expiry of time period. ■ Mutual consent of all the partners. ■ If such partnership is continued after the expiry of term or completion of venture, it is deemed to be a partnership at will. ■ A particular partnership may be dissolved before the expiry of the term or completion of the venture.
  • 9. Advantages of Partnership Firm ■ Easy to form: Like sole proprietorships, partnership businesses can be formed easily without any compulsory legal formalities. A simple agreement or partnership deed, either oral or in writing, is sufficient to create a partnership. ■ Availability of large resources: Since two or more partners join hands to start a partnership business, it may be possible to pool together more resources as compared to a sole proprietorship. The partners can contribute more capital, more effort and more time for the business ■ Sharing risks: In a partnership firm all the partners “share” the business risks. For example, if there are three partners and the firm makes a loss of Rs.12,000 in a particular period, then all partners may share it and the individual burden will be Rs.4000 only. Because of this, the partners may be encouraged to take up more risk and hence expand their business more.
  • 10. Disadvantage of Partnership Firm  Unlimited liability: All the partners are jointly liable for the debt of the firm. They can share the liability among themselves or any one can be asked to pay all the debts even from his personal properties depending on the arrangement made between the partners.  Uncertain life: The partnership firm has no legal existence separate from it’s partners. It comes to an end with death, insolvency, incapacity or the retirement of a partner. Further, any unsatisfied or discontent partner can also give notice at any time for the dissolution of the partnership.  No transferability of share: If you are a partner in any firm, you cannot transfer your share or part of the company to outsiders, without the consent of other partners. This creates inconvenience for the partner who wants to leave the firm or sell part of his share to others.
  • 11. Partnership deed  A partnership is formed by an agreement. This agreement may be in writing or oral, though the law does not expressly require that the partnership agreement should be in writing, it is desirable to have it in writing in order to avoid any dispute with regard to the terms of the partnership. The document which contains the term of a partnership as agreed among the partners is called “partnership deed”.  The partnership Deed is to be duly stamped as per the Indian Stamp Act, and duly signed by all the partners
  • 12. Contents of partnership Deed A partnership deed may contain any matter relating to the regulation of partnership but all provisions in the deed should be within the limits of Indian Partnership Act, 1932. However, A Partnership Deed should contain the following clause:  Nature of business  Duration of partnership  Name of the firm  Capital  Share of partners in profits and losses  Bank Account firm  Books of account  Powers of partners  Retirement and expulsion of partners  Death of partner  Dissolution of firm  Settlement of disputes
  • 13. Mutual rights and liabilities - ■ a) a partner is not entitled to receive remuneration for taking part in the conduct of the business; ■ b)The partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm. ■ c)Where a partner is entitled to interest on the capital subscribed by him such interest shall be payable only out of profits. ■ d) a partner making, for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six per cent, per annum
  • 14. ■ f) a partner shall indemnify the firm for any loss caused to it by his willful neglect in the conduct of the business of the firm. ■ e)The firm shall indemnify a partner in respect of payments made and liabilities incurred by him. ■ i) In the ordinary and proper conduct of the business, and ■ ii) In doing such act, in an emergency, for the purpose of protecting the firm from loss as would be done by a person of ordinary prudence, in his own case, under similar circumstances and Cont.
  • 15. POSITIONOF MINOR ■ Sec.30(1),A person who is minor according to law to which he is subject may not be a partner in a firm but with the consent of all partners, he may be added to the benefits of partnership. ■ RIGHTS: ■ Right to receive agreed share of profits ■ Have access to accounts of firm. ■ If share in profits not given can sue.
  • 16. LIABILITIES OF MINOR ■ Only to the extent of share in profits(not personally liable) ■ OnAttaining Majority: Within 6 months he should give notice whether he is joining the partnership firm or, not; else automatically he enters into partnership.
  • 17. TYPES OF PARTNERS 1.Active Partner 2.Sleeping or, Dormant or, Secret Partner 3.Nominal Partner: Neither contribute to capital nor, takes a share of profit nor, takes in the management. His name is landed for goodwill but, he is liable to the third party. 4.Partners in Profit only .5.Sub-partners-When a partner shares his profit with a third person, such third person is Sub-partners. 6.Partner by holding out or, by estoppel: Partner by representation only not entered by agreement. 7.Working Partner: Can merely be an employee, although he is entitled to share the profits as remuneration for the service rendered by him.