Partnership

Its take more than a handshake to form a partnership. written agreement is required.

Partnership and Its Characteristics

Partnership or firm as it is often called is the 2nd stage in the evolution of forms of business organization. Partnership as a form of business organization grew out of the limitations of individual proprietorship. Salient Features or Characteristics of Partnership A partnership is an association of two at more persons to carry on as co owners of a business and to share its profits and losses. Section 4 of the Partnership Act defines partnership as “the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all. Merits and Demerits of Partnership Form of Organization Partnership is an association of two or more individuals (but not more than 20) who agree to share the profits of a lawful business which is managed and carried on either by all or by any, or some of them acting for all Partnership Agreement/Deed Partnership agreement in writing is called partnership deed. Partnership deed is a document which is signed by all the partners and which contains all the matters determining and governing the mutual rights, duties and liabilities of the partners in the conduct and management of the affairs of the partnership. Kinds of Partners The partners of a firm are broadly divided into three main categories. General Partners, Special Partners and Other Partners. Partnership Distinguished From Co-Ownership Partnership and co-ownership have different meanings. In partnership, there is an association of two or more, persons who carry on common business for earning profit. They share its profits and losses as per oral or verbal agreement. Mutual Duties, Rights and Liabilities of Partners in the Absence of Partnership Agreement The duties, rights and liabilities of partners in the conduct and management of the affairs of the partnership are contained in its partnership deed. However, if on any point, the deed is silent, then the relevant rule of the Partnership Act, 1932, will apply. Reconstitution of Partnership or Admission and Withdrawal of Partners in a Firm According to the Partnership Act, no new partner can be taken in a firm without the consent of all the existing partners. The new partner when admitted is called ‘incoming partner’. An incoming partner is not liable for any act of the firm done before he became a partner. The Position of a Minor in Partnership A minor partner is a partner who is not major (not completed 18 years). A minor cannot enter into a contract according to Section 20 of Partnership Act. A contract with minor is void. Registration of a Firm Partnership is the result of an agreement between persons (minimum 2 maximum 20) who agree to carry on a lawful business with the object of earning profit.