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Partnership

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Partnership

  1. 1. Partnership
  2. 2. Definition 1. Association of more than two or more pesrons: At least 2 persons with a maximum of ten in case of a bank and in case of any other business 20 (Sec 11 of companies act 1956) Person should not be a firm because firm does not hava a separate legal entity ( Duli chand vs commissioner of income tax), two paretnership firm cannot enter into partnership., a company being a speratrate identity can enter into partnership if it is authorised by its MOA.
  3. 3. 2. Agreement : Partnership relation is one of contractual nature.It arses from contract and not from status, as agreement between the partners is the basis of this contract.The agreement may be written or oral, agreement may be fixed for a period or open to partnership to withdraw from the partnership at any time. Partnership does not arise out of provision of law. 3.Business : A partnership can be carried on for only carrying on some business, it includes every trade,occupation, and profession.Business means the idea of running business involving numerous transactions.
  4. 4. 4.Sharing of profits: The object must be made to make,profit must be distributed according to agreed ratio.If a person claimimngg to be a partner of his right to profit is deprived of profits he is not a partner.A person may share profit yet not be partner. As between partners it may be agreed that one or more of the partners shall not be liable for loss. 5.Mutual Agency; Can be carried on by one or all.A partner is both an agent and principal.The question of whether a person is a or is not a partner depends in nearly all cases upon whether he has the authority to act for those who are admittedly partners and whether those admitted partners has the authority to act for him.
  5. 5. Law of partnership –An extension of the law of agency • A partnership can be carried out by all or one partner acting on his behalf. Thus relationship between principal and agent is established between them .Sec 18 also provides that the subject to the provisions of the Partnership act a partner is a agent of the firm for the purposes of the business of the firm Case law : Cox Vs Hickman A partner assumes a two fold character: 1. He is an agent of the firm, he ccan bind the frim by his acts provided the acts are within his scope and they are done for the purposes of business. 2. He is the principal so far as the other partner is concerned.
  6. 6. Formation of Partnership • A partnership should be based on agreement.It may be oral or written, there msut be free and genuine consent of partners which must be competent to contract. The object of partnership should be lawful and other legal formalities should be full flled.The follwing points need to be noted: 1. Minor partner 2. Consideration 3. Partnership deed
  7. 7. Partners,firm and firm name • Partners who have entered into partnership are called as individually as partners and collectively as a firm, the name underwhich business is carried on.. The name s only a shart way of expressing the names of all the partners. The name has follwing two limitations 1. A first name shall not contain any words expressing or implying sanction, approval or patronage of govt,,the state govt may however allow its name to be used. 2. The law safeguards the trade names and goodwill of other persons who are already existing, the fact that a firm has already been doing business under certain name does not prevent a new firm from adopting it, but if name is used with a fradulent intenetion the law may intervene.
  8. 8. Test of partnership • In order to determine the existence of partnership between group of persons the definition in sec 4 is used as a test i,.e one must look at the agreement between them. If the agreement is to share profits and business is carried by one or all of them then there is partnership otherwise not. • The problem arises when there is no partnership agreement among partners or agreement is such it does not speak of partnership then we have to refer to sec 6 which lays down rules. • Real relation is basis : In determining wheteher a group of people is or not a firm whether a person is or not a partner in a firm, regard shall be had to the real relation between the arties as shown by all facts taken together. • Mixed question of law and fact.
  9. 9. Cases where no partnership relation 1. Joint owners sharing gross returns 2. Sharing of profits The real test is Mutual Agency Who are not partners: 1. The members of an Hindu undivided family carrying on family business 2. A burmese Buddhist husband and wife carying on business as such.
  10. 10. Relation of Partners Right of a Partner 1. Right to take part in business 2. Right to be consulted 3. Right to access of accounts 4. Right to share profits 5. Right to interest on capital 6. Right to interest on advances 7. Right to be indemnified 8. Right to use of partnershipproperty 9. Right of partner as agent of firm] 10. No new partner to be introduced
  11. 11. 11. No liability before joining 12. Right to retire 13. Right to be expelled 14.Right of outgoing partner to share in the subsequent profit.
  12. 12. Duties of partner 1. To carry on business to the greatest common advantage 2. To observe faith 3. To indemnify fraud 4. To attend dilligently 5. No to claim remuneration 6. To share losses 7. To indemnify to wilful neglect 8. To hold and use property of the firm exclusively for the firm 9. To account for personal profit 10. To account for profits in competing business 11. To act within authority 12. To be liable jointly and severally 13. Not to assign his rights
  13. 13. Types of Partners • Actual or ostensible patner • Sleeping or dormant partner • Nominal partner • Partner in profit only • Sub Partner • Partner by estoppel or holding out

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