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Partnership
Business:
According to Partnership Act,1932
“Partership form of a business is a relation e/w persons who bane agreed to share the profits of the business
carried on by all or anyone of them acting for all.”
Types
of Partners:
I.
Active Partner:An active partner participates
actively in the management of the business.These partners contribute the
capital,have unlimited liability and get
a salary for their contribution towards the business.
II.
Pormant
Partner:This partner doesn’t participates actively in the business of the
firm.He contributes the capital,Shares profit and loss and has unlimited
liability.
III.
Secret Partner:This is a partner whose
association with business is unknown to the general oublic other than this
feature,he has the same features as rest of the partners.He contributes the
capital,participates in the management,shares profit and loss,and has unlimited
liability.
IV.
Nominal Partner:This partner allows the use of
his or her name by the business but he does not contribute the capital,he does
not take active part in management,does not share profit and loss,and is liable
for repayment.
V.
Partner by ESTOPPEL:A person sometimes,through
his or her conduct or behavior gives an impression that he is a partner of a
firm.He is liable for the debts of the firms because in the eyes of the third
party they are partners.Such a person is known as person by estoppel.
VI.
Partner by Holding Out:This person is not a
partner of a firm but knowingly allows himself or herself to be represented as
the partner of the firm.He is liable to outsiders for debts.In case he wants to
save himself he should immediately issue as denial on public platform.
Partnership Deed:
A partnership deed is voluntary association.People come
together for achieving common objectives.To avoid conflict amongst the partners
a document known as Partnership Deed is made.It is advisable to have a written deed
because it is an evidence in the court of law.This deed contain informations
and the code of conduct of partnership.
Partnership includes following information:
1)
Name of the firm
2)
Location of the firm and its nature.
3)
Duration of the business.
4)
Investment made by such partner.
5)
Ratio of sharing profit & loss.
6)
Salary and Withdrawal.
7)
Interest on capital and drawings.
8)
Procedure of dissolution.
9)
Preparation of accounts and audits.
10)
Methods of solving disputes.
Types of Firms , ON
THE BASIS OF DURATION:
I.
Particular Partnership:This type of partnership
is for a specific time period,a specific project.Once the time expires and the
project is complete this partnership automatically dissolve.
II.
Partnership at Will:This type of partnership
continue for as long as the partners and used
at gets dissolve where as partners gives as notice.
Partnership Firms
ON THE BASIS OF
LIABILITY
I.
General Partnership:This is a partnership firm
where the liabilities of all the partners is unlimited.The partners enjoy the
right to participate in the management firm and kind each other with their activities.The registration of the firm
is optional and it is affected by the death or the retirement of one partner.
II.
Limited Partnership:This is a partnership where
at least one person has limited liability and rest have unlimited and
vice-versa.
A partnership where one
person has unlimited liability and all other have limited liability in that
case death or insolvency of limited partners will not affect the firm.
Features of
Partnership
I.
Formation:Firm is governed by inclign partnership act 1932,it came
into existence through a legal agreement known as partnership deed.This
document has the information about the partnership firm that it is lawful and
is main with the motive of profit.
II.
Liability:According to the act the liabilities
of partners is unlimited their private property can be claimed for
debts,although there are some type of partnership firm where some members can
have limited liability with some restriction(Their existence or absent do not
affect the firm).
III.
Continuity:It lacks continuity,death,retirement
etc. of a any partner can bring the partnership to an end.Remaining partners
have to make a new agreement if they wish to continue.
IV.
Membership:The minimum no. of members required
for any partnership is 2 while the maximum no. in case of banking firm is
10,and any other business it is 20.
V.
Mutual Agencies:It includes any business can be
carried by all the members or few members(active partners).In other words,an
active partner takes the decision or behalf of doment partners.In such a case the partner taking the decisions
will bind the other with his decisions.It means that the other partners will be
liable for the consequences of the decisions made.
Merits of Partnership
I.
Easy to form:It is easy to form a
partnershipfirm,as no legal formalities are required to be completed.Even
registration of partnership firm is not compulsory.
II.
Larger Financial Resources:In partnership firm
all the partners contribute some amount of capital.As a result,the financial
resources of partnership firm are larger than Sole Prop. Or JHF Business.
III.
Risk Sharing:In partnership firm all the
partners share the risk in the same ratio as they share the profit.The share of
risk motivate partners to undertake riskier projects and earn more projects.
IV.
Division of Work:In Partnership the partners can
divide the work according to their skill and knowledge.The division of work
leads to specialization and efficiency in management and other activities of
the firm.
V.
Motivation:In partnership are all partners get
share of profit,so they get motivated to work more to earn higher profits.There
is direct relationship between effort and reward.
VI.
Secrecy:This form is not required to publish its
accounts.Therefore its affairs remain secret.On the other hand,all its
activities are carried on by partners.
Demerits of
Partnership
I.
Unlimited Liabilities:The partnership of all the
partnership partners is unlimited.In case of losses partners not only lose the
business properties but creditors can claim over their personal property also
to get their A/c settled.
II.
Non-transferability of Share:The partners are
not permitted to transfer their share to any other person.If he/she is willing
to do so then he/she has to take the consent of all partners.
III.
Conflicts:The partners in partnership firm come
from different backgrounds.So,there are different opinions.If partners adopts a
right attitude then conflict may
arise among them.
IV.
Uncertainity:This type of firm get affected by
the death,insolvency or incapacity of any one partner.Even a partner can demand
dissolution of the firm any time he desires.
V.
Risk of Mutual Agency:The contract signed by any
one partner is binding on the other partners due to principle of mutual
agency.A dishonest partner may either enter into contract for personal
benefit.In that case all the partners will have to suffer the loss.
VI.
Lack of Public Confidence:The public has less
trust and faith in partnership firm because of the accounts and annual reports
of partnerships firm are not published.So,people do not have trust into their
dealings.
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