2. What Is Partnership?
Partnership is the second stage in the evolution of
form of business organization.
According to L.H.Haney :
“partnership is the relationship between persons who
agree to carry on a business in common with a view to
private gain.”
two or more person not exceeding 20 members.
3. Elements Of Partnership
Association of at least two persons
Contractual relation
Agreement must be to share profit /loss of a business
Mutual agency :every partner is agent of other partners and at the
same time of the firm
Partnership Act of 1932 Defines:
It is the relationship between persons who have agreed to share the
profits of a business carried on by all or any one of them acting for all.
Persons forming partnership are individually known as partners and
collectively a firm.
4. Characteristics Of Partnership
Formation
Financing
Management
Restriction on transfer of interest
Unlimited liability of partners
Duration
Taxation
Implied authority
5. Merits Of Partnership
Easy to form
Favorable credit standing
Large capital
Greater management ability
Union of business ability
Profit incentive
Advantages of secrecy
Retention of a skilled workers
Brake on hasty decisions
Special protection on minor
Increase in the spirit of cooperation
Tax advantage
Ease of dissolution
6. Demerits
Unlimited liability of partners
Limited life of firm
Frozen investment
Disputes among the partners
Possibility of misuse of resources
Loss of business opportunities
Divided control
Lack of public confidence
Implied authority
7. Partnership Deed
Partnership agreement in writing is called partnership deed. it 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.it may also be referred to as “articles of
partnership” containing the name, nature of business, capital
,duration of the firm etc
8. Need And Importance Of
Partnership Deed
The importance of partnership deed can be judge from
the following facts :
It forms the basis of formation of the partnership.
It defines the mutual right, duties and liabilities of the
partners.
It helps in minimizing the areas of disputes among the
partners
It serves as guidepost for the conduct of firms
business.
9. Contents Of Partnership Deed
Name and location of business
Nature of business
Amount of capital contributed by each partners
Provisions of reinvestment in business
Right ,duties and obligations of each partners
Life of business
Method of distribution of profit and sharing of the loss
Method of admitting a new partners
Method for withdrawal of a partner
10. Retirement and death of a partner
Procedure to be followed for removal of a partner
Arrangements in the situation of insolvent of partner
Method used in account preparations and audit
Operation of bank account
method for the dissolution of the firm
Negotiation in the case of dispute among partners
11. Kind Of Partners
General partners
All the partners of the firm are general partners .
a. Active partners/ working partners
b. sleeping partners /dormant partners
Special partners
Whose liability is limited to the extent of their capital contributed in the
firm. They can not take part in the management .
Other partners
Secret partners ,nominal partners ,minor partners ,partners at will
,partners in profit only
12. Differentiate B/W Partnership
And 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 both share the profit and loss.
While co ownership refers to joint ownership in a
property collectively without any business motive
13. Duties Of Partners
Partnership Act 1932 describes the general duties of
partners as under:
“partners are bound to carry on the business of the firm
to the greatest common advantages, to be just and
faithful to each other and to render the true accounts and
full information of all the things affecting the firm to any
partner or his legal representative”.
14. Duties Of Partners
Common advantage
Protection
Loss caused by willful neglect
Due diligence
Provision of information
15. Rights Of Partners
Right to take part in the management
Expression of opinion
Inspection of books
Right to be indemnified
Right to continue
Use of property
Sharing of profit and loss
Interest on capital
Right to retire
16. Liabilities Of Partners
Joint liability
Liability of a new partner
Property of deceased
Liability of retiring partner
Competitive business
No private use of property
17. Admission and Withdrawal Of
New Partners In A Firm
According to 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.
A partner may retire or withdraw from a firm with the
consent of all partners, in accordance with an express
agreement by the partners .
18. Registration Of A Firm
The partnership Act of 1932 does not make
compulsory for the firms to be registered with the
registrar of partnership firms . However if a firm
registered then it avail benefits .
How Registration Is Done?
The whole process of registration is divided in two parts:
a. Submission of a application
b. certification
19. a. Submission Of Application
The application for registration of the firm is submitted to the Registrar
of Partnership ,on a prescribed printed form. The application is to be
signed by all the partners. It contains the following particulars about
the firm:
The name of the firm
The name of the place where the firm carries on the business
The partners date of joining the firm
the name in full and permanent address of the partners
The duration of the firm
20. b. Certification
On receipt of the application for registration, the
Registrar examine the particulars given in the
application. If the Registrar is satisfied he records the
name of the firm in a register called the Register of
firm.
If firm wishes any changes after registration then it can
do it after revised application.
21. Advantages Of A Registered
Firm
Term of agreement are clear to every partners by an
expert lawyer.
If an issue arises among the partners then it become
the basic legal document for decision.
The firm gets the right to sue outside partners in court
for the enforcement of its rights.
A retiring partner is not held liable for the debts of the
firm after the date of his retirement .
Benefits to incoming partners .
22. Dissolution Of A Partnership
If one partner of a firm dies, retires or unable to pay debt ,the
remaining partners may agree to continue the firm under the same
name.
23. Dissolution Of A Firm
Dissolution of partnership firm and dissolution of
partnership are two different terms. Dissolution of the
partnership firm is the closure of partnership business.
Here all the partners cease to carry on the business.
The relationship between all the partner of a firm is
broken so as to close the business of the firm.
24. Modes Of Dissolution Of A
Firm
Dissolution by agreement
Dissolution by notice
Compulsory dissolution
Contingent dissolution
Dissolution by the court
25. Requisites Of An Ideal
Partnership
An ideal partnership is one in which the partners work
in full confidence, trust and confidence with one
another so that the business is a success .The main
requisites of an ideal partnership are:
Mutual understanding
Common approach
Good faith
Balance of skill and talent
Adequate capital
Written agreement
registration
26. Forms Of Business Partnership
Under Islamic Laws
Shirkat-al-Mufavadha
In this form of partnership the amount and type of capital
contributed by each partners is equal. The profit or losses
are equally distributed.
Shirkat-al-Anan
In this type of partnership the capital contributed by the
partners is not equal. One of the partner is the major
contributor of financial resources. The profit or loss
divided on the basis of capital invested.
27. Shirkat-al-Sanai
It is an association of different skills involved in the
operation of a business. The profit is distributed among
the partners according to the terms of agreement .
Shirkat-al-Wajooh
In this form of partnership, the person with high integrity,
honesty and reputation join together for carrying on a
business .They on the basis of high credit rating get loans
and start the business. The profit or loss shared on equal
basis among all partners .
28. Form Of Partnership
General partnership
The liability of all the partners is unlimited.
Limited partnership
The liability of the partners is limited to the extent of
capital invested in the business.
