Relation between persons who have agreed to share the profits of a business carried on by all or any of them acting

for all.

Persons who have entered into partnership with one another are called individually partners and collectively a firm and the name under which their business is carried on is called the firm name.

1.

2. 3.

4.

5.

Contract (Relation of partnership arises from contract and not from status.) Association of two or more persons Carrying on of business Sharing of profits-(Sharing of losses not necessary.) Mutual agency-(Every partner is both an agent and principal for himself and other partners)

Unlimited liability No separate legal entity Utmost good faith Restriction on transfer of interest Unanimity of consent

Based on agreement oral/written/implied All essential elements of a valid contract must be present Free and genuine consent of parties competent to contract Object lawful and all legal formalities to be complied with.

1)

Minor partner Minor may be admitted to the benefits of partnership with consent of all partners. Consideration No consideration is required to create partnership which is an extension of the law of agency.

2)

Agreement made between the partners in writing and such document is called Partnership Deed It must be duly stamped as required by the Indian Stamp Act, 1889. Contents: provisions relating to Nature, principal place of business, firm name, names and addresses of partners, duration of firm, profit-sharing ratio, interest on capital & drawings, valuation of goodwill, management, accounts, etc.

A partnership may be illegal in either of two ways: 1. By being formed to carry on an illegal business. (e.g., to carry on a business of illicit liquor.) 2. Where the number of partners exceeds the maximum limit (i.e. banking business: more than 10 and other businesses: more than 20) or comes down to one person.

1. 2. 3.

Partnership for a fixed term Partnership at will Particular partnership

 The

partners may, at the time when they enter into partnership agreement, fix the duration of the partnership.
is entered into for a fixed period of time and when this period is over, it comes to an end.

Partnership

1) When

the partnership is not for a fixed period of time and, 2) When no provision is made as to when and how the partnership will come to an end.
A partnership-at-will can be dissolved at any time by any of the partners notifying his willingness to do so.

 When

a person becomes a partner with another person or persons in any particular adventure or undertaking. comes to an end as soon as that adventure is completed.

It

1. 2.

3.
4. 5. 6.

Active partners Sleeping partners Silent partners Partner in profit only Sub-partner Partner by estoppel or holding out

1.

2.

3.
4. 5. 6. 7.

Right to take part in the conduct of the business. Right to be consulted. Right of access to books. Right to share the profits. Right to interest on capital. Right to interest on advances. Right to indemnity.

Absolute duties

Qualified duties

Absolute duties 1. The duty to carry on the business to the greatest common advantage. 2. The duty to be just and faithful inter-se. 3. The duty to render true accounts. 4. The duty to provide full information. 5. The duty to indemnify for loss caused by fraud. 6. The duty to be liable jointly and severally. 7. The duty not to assign his interest.

Qualified duties

1.
2. 3.

4.
5. 6. 7.

The duty to attend diligently to his duties. The duty to work without remuneration. The duty to contribute to the losses. The duty to indemnify for willful neglect. The duty to use firms property exclusively for the firm. The duty to account for personal profits derived. The duty not to compete with the business of the firm.

A statement in the prescribed form and accompanied by the prescribed fee stating:
Name of the firm, 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 addresses of the partners, and The duration of the firm - Signed by all the partners/agents and verified in prescribed manner.

1) A partner cannot file a suit against the firm or any partner, so as to enforce a right a) arising from contract, or b) conferred by the Partnership Act. 2) An unregistered firm cannot sue a third party to enforce a right arising from a contract
.

1.
2.

Dissolution of Firm Dissolution of Partnership

1. 2. 3.

4. 5.

By Agreement By Notice On the happening contingencies Compulsory dissolution Dissolution by the court

of

certain

1.

2.

3. 4. 5.

6.

Continuing liability of partners after dissolution Continuing authority of partners for purposes of winding up. Right of partners to enforce winding up. Liability to share personal profits. Rights where partnership contract is rescinded for fraud. Right to impose restrictions.

Basis Regulation Act No. of members Entity Liability Management 2-20

Partnership Indian Partnership Act,1932

Company Companies Act,1956 2-50(Pvt.) 7-No limit (Public) Separate legal entity Limited liability By Board of Directors

No separate legal entity Unlimited By all partners

Transfer interest
Audit Registration Winding up

of Not possible without consent of Freely transferable other partners

Not mandatory if below Rs.40 Mandatory lakhs total sales Not compulsory Compulsory majority By any partner-if partnership at Requires will approval