Partnership

Section 4 of the Partnership Act, 1932 defines the term Partnership as under: 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. Thus, Partnership is the name of legal relationship between/among persons who have entered in to the contract

Partnership Act, 1932

Indian Partnership Act, 1932 is a Central Act. (made by Parliament

This Act deals with special type of contract

Provisions regarding contract of partnership were earlier contained in the Indian Contract Act, 1872. This Act extends to the whole of India except the state of Jammu and Kashmir.

This Act came in to force on 1.10.1932, except section 69 which came into force on the 1st Day of October, 1933.

Types of Partners
Active partner Sleeping partner Nominal partner (does not contribute any capital; but lends his name and credit to the firm) Sub-partner

Partner by Estoppels or Holding out:

Minor as a partner

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

Nature of business
Duration of partnership Name of the firm Capital Share of partners profits and losses Bank Account firm in

Books of account
Powers of partners

Retirement and expulsion of partners

Death of partner

Dissolution of firm
Settlement of disputes

Characteristics of Partnership

Agreement Registration Number of Partners Profit and Loss Distribution Business Unlimited Liability

Share in Capital Management Payment of Tax Co-Operation Transferability of Shares Dissolution

Maximum Limit on Number of Partners

Section 11 Companies Act provides that the maximum no. of persons, a firm can have: 10

In case of partnership firm carrying on a banking business

In case of partnership firm carrying on any other business

20

If the number of partners exceeds the aforesaid limit, the partnership firm becomes an illegal association.
If an association of persons or firm having members or partners exceeding the Above limit will not be an illegal association if that firms objective is not to earn profit.

Essentials Of A Partnership
1. 2. 3. 4. 5. Agreement Sharing Of Profits Business Relation Between Partners Two or More Person

Rights Of The Partners

1. 2. To take part in the management of the business. To express opinion in matters connected with the business. He has a right to be consulted and heard in all matters affecting the business of the firm To have free access to all the records, books of account of the firm and take copy from them. To share in the profits of the business. Every partner is entitled to share in the profits in proportion agreed to between the parties. To get interest on the payment of advance. Where a partner makes for he purpose of the business. To be indemnified by the firm against losses or expenses incurred by him for the benefit of the firm.

3. 4.

5. 6.

Registration Of A Partnership Firm

Procedure For Registration

The registration of a firm may be effected at any time by sending by post or delivering to the Registrar of Firms of the area in which any place of business of the firm is situated or proposed to be situated, a statement in the prescribed form and accompanied by the prescribed fee, stating :

1. 2. 3. 4. 5.

the firm name. the place or principal place of business of the firm. the names of any other places where the firm carries on business. the date when each partner joined the firm. the names in full and permanent addresses of the partners. the duration of the firm.