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Partnership firm
- 1. PARTNERSHIP FIRM GROUP MEMBERS: ANAMOL SAPKOTA RISHAV DEV REGMI PRAKASH THAPA PRADEEP ADHIKARI NISHAN DAHAL SUJAN ACHARYA Monday, April 24, 2017PARTNERSHIP FIRM 1 PARTNERSHIP FIRM
- 2. OUTLINE Partnership and Partnership Firm Characteristics of Partnership Firm Advantages of Partnership Firm Disadvantages of Partnership Firm Registration Procedure Monday, April 24, 2017PARTNERSHIP FIRM 2 PARTNERSHIP FIRM
- 3. PARTNERSHIP FIRM Partnership is an agreement made between two or more persons for carrying out any business activities by sharing Investment, Labour and Skill as well as Profit and loss. According to Section 3 of Partnership Act of Nepal 2020, “Partnership – Business activities registered with the government authority and carried out by all or any of them acting for all by making an agreement and under a single name with the motive of profit.” So, Partnership Firm is a kind of business organization in which, two or more persons agree to carry on the business, on behalf of the firm or partners and to share profits & losses mutually. Monday, April 24, 2017PARTNERSHIP FIRM 3 PARTNERSHIP FIRM
- 4. CHARACTERISTICS 1. Agreement 2. Registration 3. Profit and Loss Distribution 4. Business 5. Unlimited Liability 6. Entity 7. Share in Capital 8. Management 9. Co-Operation 10.Partners are Agent 11.Dissolution Monday, April 24, 2017PARTNERSHIP FIRM 4 PARTNERSHIP FIRM
- 5. ADVANTAGES 1. Easy to start 2. Sufficient Capital 3. Incentive to work 4. Effective Management 5. Facility of loan 6. Flexibility 7. Secrecy 8. Prompt Decision 9. Equal rights of partners 10.Easy to dissolveMonday, April 24, 2017PARTNERSHIP FIRM 5 PARTNERSHIP FIRM
- 6. DISADVANTAGES 1. Limited Capital 2. Unlimited liability 3. Difficult to transfer share 4. Uncertain existence 5. Lack of public faith 6. Problem of dispute 7. Lack of prompt decision 8. Risk of implied authority Monday, April 24, 2017PARTNERSHIP FIRM 6 PARTNERSHIP FIRM
- 7. REGISTRATION PROCEDURE A firm shall have to be registered in the record of the concerned Department within a period of Six months from the date when the partners enter in to the agreement of partnership pursuant Partnership Act, 2020; provided that, any act or business carried on by the partnership or for the partnership which is not registered pursuant to this Section shall not get legal validity pursuant to this Act. Not required to register the firm under Partnership Act, 2020 if already registered under Private Firm Registration Act, 2014. Monday, April 24, 2017PARTNERSHIP FIRM 7 PARTNERSHIP FIRM
- 8. REGISTRATION PROCEDURE 1. Apply for registration In order to register a firm, an application in the format as referred to in Schedule -1(a) shall be submitted before the concerned Department along with the fees as prescribed in Schedule- 2(a) and a copy of the agreement concluded between partners. It should state the details mentioned in Section 6 of Partnership Act, 2020. Monday, April 24, 2017PARTNERSHIP FIRM 8 PARTNERSHIP FIRM
- 9. REGISTRATION PROCEDURE 2. Deposit registration fee: Registration fee should be deposited in the Nepal Rastra Bank Voucher is needed for the deposit of registration fee Should be enclosed in application form If the firm is commercial, recommendation letter from Nepal chamber of commerce is also required Monday, April 24, 2017PARTNERSHIP FIRM 9 PARTNERSHIP FIRM
- 10. REGISTRATION PROCEDURE 2. Deposit registration fee: Capital Registration fee Up to 1,00,000 Rs 700 From 1,00,001 to 3,00,000 Rs 2100 From 3,00,001 to 5,00,000 Rs 4100 From 5,00,001 to 10,00,000 Rs 7600 Up to 10.00,001 to 50,00,000 Rs 10100 Above 50,00.000 Rs 15100 Monday, April 24, 2017PARTNERSHIP FIRM 10 PARTNERSHIP FIRM
- 11. REGISTRATION PROCEDURE 3. Receiving the Certificate of Registration Concerned department receive the application An authorized officer will examine If the sections 6 and 7 of Partnership Act, 2020 are fulfilled, the form is approved and “Certificate of Registration” is issued and then legal business can be operated. Monday, April 24, 2017PARTNERSHIP FIRM 11 PARTNERSHIP FIRM
- 12. REFERENCES Partnership Act 2020. (2015). “Partnership Act, 2020 E”. LawCommission.Gov.Np. Accessed April 23 2017. https://www.lawcommission.gov.np/en/ documents/2015/08/partnership-act- 2020-1964.pdf. Simplified. 2017. "Advantages And Disadvantages Of Partnership Firm". Kullabs.Com. Accessed April 23 2017. https://www.kullabs.com/classes/subjects/units/lessons/ notes/note- detail/6248. "Registration And Renewal Of Partnership Firm In Nepal - Reference Notes". 2013. Reference Notes. Accessed April 23 2017. http://notes.tyrocity.com/registration-and-renewal-of-partnership-firm-in- nepal/. Monday, April 24, 2017PARTNERSHIP FIRM 12 PARTNERSHIP FIRM
Editor's Notes
- There are three major points in this definition, they are: 1. Agreement – There must be an agreement between partners, irrespective of oral or written. 2. Profit – The profit & loss of the business must be distributed among the partners, in the specified ratio. 3. Mutual Agency – Each partner is an agent of the firm as well as of the other partners who carry on the business.
- 1. Agreement:- Without agreement partnership cannot be formed. The agreement may be written or oral. But it must be written on settle the disputes. 2. Registration:- It is not necessary that a partnership may be registered. But in case of registered firm many problems can be created. 3. Profit and Loss Distribution:- The basic aim of partnership is to earn profit. This profit is distributed among the partners according their agreement. In case of loss also all the partners share in it. 4. Business:- The object of the partnership it to carry on the business. It may be production or trading. It should be according the laws of the state. 5. Unlimited Liability:- The liability of the partner is not limited to his invested amount. In case of loss the private property of the partner also used to pay the business obligations. 6. Entity:- Law has not granted it any legal entity, it is not independent from the partners. It has not separate entity from its members. 7. Share in Capital :- According to the agreement every partner contributes his share. It is not necessary all the partners should contribute equally. Some people provide only skill and ability to become a partner. 8. Management :- All the partners can participate actively in the business management. Sometimes only few persons are allowed to handle the business affairs. 9. Co-Operation :- For the successful partnership mutual co-operation and mutual confidence is an important factor. 10. Partners are Agent :- Every partner stand as an agent and principal to one another. In the position of an agent one can do contract with other parties on behalf of the firm. 11. Dissolution:- It is a temporary form of business. It operates at the pleasure of the partners. It is dissolved if a partner leaves dies or declared bankrupt or insane. Partners can also dissolve it by obtaining the degree from the court.
- Easy to start A partnership form can be started by making the agreement between partners and concern department of Nepal government. This business does not require complex legal procedures for an establishment. Sufficient Capital: In comparison to sole trading concern, partnership can generate sufficient capital for business. Different partners have the different source of money. Because of this, partnership can generate too large sum of money for its establishment of growth and its expansion. Incentive to work: In partnership business, the partners are directly or indirectly involve in business activity. That partner who directly (actively) involve in business will get salary as well as share in profit. Therefore, a hardworking partner will get the incentive in the form of profit share. Effective Management: The works and responsibilities of partnership firms are divided among the partners. Different partners are allocated different work responsibility. This helps to bring effectiveness in the management of the business of an organization. Facility of loan: As partnership firm is established by two or more than two people i.e. the size of the partnership is comparatively large. The goodwill and reputation are also high,because of this, a partnership firm has the large source of the loan. It can generate sufficient money for expansions growth. Flexibility: Partnership business is more flexible than sole trading concern because the business can be easily financed for growths and expansion. On the other hand, partners may go out or come into business but the partnership business is not affected. Secrecy: In the partnership, there is no legal obligation to partners to publish its finance information, if the partners intend to keep information secret. It is possible to maintain information secret. Prompt Decision: As the partners are directly involved in business activity, they are readily available for decision making. Because of this, partnership firm has higher chances of getting the prompt decision. This could be much more beneficial for the emergency situation. Equal rights of partners: The concept of minority and majority is not allowed in partnership. All the partners have equal rights to participate in decision-making and involve in business activity. The concept of share is applied only in profit distribution. Easy to dissolve: A partnership business can be dissolved after making the agreement between partners regarding the dissolution of a business. The dissolution of partners does not require any complex legal procedure.
- Limited Capital: As the partnership business is established and managed by few partners it has less chance of accumulating a large amount of capital. In comparison to the joint stock company, partnership has less capital. Unlimited liability: The liability of partnership firm is not limited to the property of a business. It means the partners are required to sell their personal property in case of more debt over the property of a business. Difficult to transfer share: The share of the partnership is only transferable after the agreement of own partners. A partner wishing to sell the share of a partnership must get consensus before selling it. Therefore, it has difficulty in share. Uncertain existence: A partnership business may face dissolution in case of death, insolvency or mental or physical illness of active partners. The partnership of business could be shut down by the partner after making the agreement between them. Therefore, it has uncertain existence. Lack of public faith: Since the partnership business has limited sizes, non-existence in the eye of the law, it has less public faith. Public don’t believe in partnership business as much as the joint stock company because it has difficulty in both expansion and growth. Problem of dispute: Even though partnership business firm is firm by the agreement of partners, the partners may not agree all the time. The partners may disagree (dispute) regarding dispute of profit/use of authority. This dispute between partners may create problem in existence of business Lack of prompt decision: The partners are required to build consequences before making any decision in the partnership business. For this, all the partners must be together to discuss the matter of business. It takes a long time and brings delay in decision making. Risk of implied authority: In partnership business, active partners authorized to make a decision on behalf of business other partners. There is no certainty that active partners will make a decision for the betterment of the business. There is a risk that active partners may take a decision on personal benefits. Therefore, a partnership has the risk of implied authority.
- The application must state the following details: Full Name of the firm; Principal place of business of the firm; objectives of the firm including the short description of the nature of the goods or services; as the case may be; which the firm intends to run the business; The full name, surname and permanent address of the partners; The matter of restriction imposed on the power of a partner; The types of partnership and the capital subscribed by each partner; The name of a partner or partners who represent the firm; Mode to share the profit and loss between/among partners; Mode to calculate the profit of a firm; and Any other matters prescribed by the concerned Department stating which should be set out in the application. A Firm shall not be given such name which resembles the name of any other firm which is already registered, or the name of any limited company which is already registered under Company Act. (s. 7)
- Renewal fee Rs 100 Rs 125 Rs 150 Rs 200 Rs 250 Rs 300
- Sections: 6. Matters to be set out in an application for the registration of a firm and fees for registration 7. Name of the Firm