On October 23rd, 2014, we updated our
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FEATURES• One man control• Unlimited liability• Non-tax entity• Profits & Losses not shared by anyone• No perpetual existence• Need not be registered
ADVANTAGES• Easy to form and wind up• Better Control• Secrecy is maintained• Sole decision maker• Flexibility in operations, easy tax filing.
DISADVANTAGES• Limited capital• Unlimited liability• No perpetual succession• Limited size• Lack of managerial expertise• Unwarranted expenses• Not suitable for large scale business
HINDU UNDIVIDED FAMILY• Formation of HUF: Governed by Hindu Law.• Membership: Two types of members Karta, Co- parceners and members.• Liability: The liability of Karta is unlimited, however the coparceners are limited.• Partition: any coparcener who is unsatisfied with the decision of Karta can demand partition.• Secrecy is maintained.
ESSENTIAL CHARACTERISTICS• Association of two or more persons• Agreement• Sharing Of Profits• Mutual Agency
PARTNERSHIP DEED• Legal document created before/during the commencement of partnership firm.• It must be signed by all the partners of the firm.
It includes the following:• Name of the partners• Date of commencement• Duration of partnership• Name of the firm• Capital contributed by members• Profit/Loss sharing ratio• Location of the firm
RIGHTS OF A PARTNER• Right to take part in the partnership business.• Right to be consulted in partnership business & freedom to express his views before any decision is taken by other partners.• Right to have access, inspect and take copy of any book of accounts of the firm.• In absence of any agreement to the contrary, partners are entitled to share equally the profits and losses of the firm.
RIGHTS OF A PARTNER• Right to do all acts necessary to protect the firm from losses.• To receive interest on a capital.• Every partner has right to retire: 1. With consent of all partners. 2. In accordance with the terms. 3. By giving notice to all partners.
DUTIES OF A PARTNER• To attend diligently to his duties in the conduct of the business.• Not to carry a business which competes to the present business of the firm.• To be faithful to each other.• To render true accounts and full information.• To contribute towards the losses sustained by the firm.
Meinhard v. SalmonFacts:• Salmon – owner of 20 year lease on a hotel, defendant.• Meinhard – formed partnership with Salmon, investor, plaintiff.• Gery – third party, owner of the leased hotel.• After 20 years, defendant entered into a new lease with the third party and resigned from the existing without informing the plaintiff.
Meinhard v. SalmonIssue:• Meinhard argued the new opportunity belonged to the partnership.• Salmon argued any interest in the new lease could not belong to the partnership.Provisions:• Partners have right to be consulted.• Partners owe fiduciary duties.• Duty of communication.• Duty of loyalty.
SALIENT FEATURESThe LLP:• is a corporate body with a perpetual succession.• must have either the word “limited liability partnership” or the acronym “LLP”.• shall not be regulated by the law relating to partnership.• has no limit on the maximum number of partner.• shall be registered with the ROC under the companies act, 1956
• The liability of the partner is limited.• shall maintain proper books of account.• Inspector may be appointed by the central government to investigate the affairs.• The property of the LLP shall be treated as the property of the partner.• A partner of LLP can freely transfer his economic interest either in or in a part of third person.• LLPS can now electronically file their return.
FEATURESContained in 2 enactments:• The Presidency Towns Insolvency Act• The Provincial Insolvency ActA person is be judged as insolvent when he:• is a ‘debtor’,• is competent to form contract,• has committed an ‘act of insolvency’.
ACTS OF INSOLVENCY• Where debtor makes a transfer either in India or elsewhere for the benefit of his creditors.• If debtor makes any transfer of his property with the intention to defraud or delay creditors.• If he has given notice to any of his creditors that he has/is likely to suspend the payment of his debts.• If debtor is imprisoned in the execution of any decree of a court for the payment of money.
ACTS OF INSOLVENCYIf the debtor:• Leaves or stays out of India• Leaves his usual place of business or otherwise absents himself• Hides himself so as to deprive his creditors or means of communicating him.
REFERENCES• Elements Of Mercantile Law by N.D.Kapoor• Legal Environment Of Business(Text Book)