The presentation is about the law of partnership and its lawful definition. it also proves information about the characteristics of partnership. Moreover, it also contains the test of partners in a partnership. it also has ideal partnership and kinds of partnership.

1. LAW OF PARTNERSHIP
Prepared by:
Rahat Bilal

2. LAW OF PARTNERSHIPThe law of Partnership
The law of partnership is contained in the
partnership Act 1932 which came into
force on 1st October 1932. It extends to
whole of Pakistan (Sec 3)
Meaning and Definition
A partnership is a voluntary association of
two or more persons, who contribute
money, property, time skill to carry on
business for profit and to share the losses
of the business.

3. Some definitions of partnership are as under.
USA Partnership Law.
“An association of two or more persons who carry on as co-
owners, a business for profits”.
Dr William
“ Partnership has two or more members, each of whom is
responsible for obligation of the partnership. Each of the
partners may bind the others an the assets of partners may
be taken for the debts of the partnership”
Kimball
“A partnership is a group of men who have joined capital or
services for the prosecuting of some business”

4. CHARACTERISTICS
1. LEGAL ENTITY
A partnership has no separate legal entity a part from its
members. It means the firm and the partner are not separate
from one another. The rights and the liabilities of the firm are
considered the rights and liabilities of the partners. If any of
the partners dies, retires or become insane, the partnership
comes to an end.
2. AGREEMENT
A partnership is the result of an agreement between
persons. An agreement may be written or oral. Only the
persons who are competent to contract can from a
partnership. Thus, on the death of father who was a partner
in a firm, the son can claim share in the partnership property
but cannot become a partner unless he enters in to an
agreement with the other partners.

5. 3. NUMBER OF PARTNERS.
There must be at least 2 persons to form a partnership.
The Partnership Act does not mention the maximum limit
of persons who can be partners in a partnership firm.
According to Section 14 of Companies Ordinance, 1984
a partnership consisting of more than 20 persons cannot
be formed.
4. EXISTANCE OF BUSINESS.
The Partners must agree to carry on a business. If the
purpose is something other than business, it is not a
partnership. Therefore where there is no business, there
is no partnership.

6. 5. SHARING OF PROFITS
The agreement between the parties must be to share
the profits of a business. The profit will be distributed
among the partners according to their agreement. If
there is no agreement but the distribution of profit, it will
be distributed among the partners equally. The partners
will share the loss according to the agreement ratio.
Some partners may agree to bear all the losses of the
business.

7. TEST OF PARTNERSHIP
For determining the existence of partnership, it must be
proved.
1. There must be an agreement among the persons to be
held as partners.
2. The agreement must be for doing some business.
3. The agreement must be to share the profit s of a
business.
4. There must be a relationship of principle and agent
among the partners.
5. There must be an agreement to carry on the business
by all or any of them acting for all.

8. PARTNER
Partner who have entered in to partnership with one
another are called individually partners. Generally the
word partner means a person who has agreed to share
the profit of the business.
FIRM
The persons who have entered in to a partnership with
one another are called collectively a Firm.
FIRM’S NAME
The name under which partners carry on their business
is called the Firm’s name. The partners can choose any
name for the firm according to the following rules (Sec
58).

9. 1. The name must not be identical or similar to the name
of existing firm.
2. The name must not contain words government,
“Jinnah”, “Quaid-e-Azam” or words showing the
approval of the Federal Government or any provincial
Government , without the consent of the provincial
government.
3. A Firm must not contain the name of “United Nations or
Abbreviations of its subsidiary body without the
sanctions of the secretary general of the UNO.
4. A Firm name must not contain the name of “ World
Health Organization” or its abbreviations without the
sanction of the Director General of WHO.

10. IDEAL PARTNERSHIP
1. MUTUAL UNDERSTANDING
There must be mutual understanding among the
partners. This is possible only when the partners know
each other for a long time.
2. COMMON PURPOSE.
All the Partners must act for the common purpose.
They must cooperate and make join efforts for the
common advantage.
3. GOOD FAITH.
All the partners should work in good faith. Each partner
must be able to play his part in the management of the
firm efficiently.

11. 4. SUFFICIENT CAPITAL
The business needs capital for Long term and short
term purposes. The responsible partner can secure
funds from external sources. The drawing s of the
partners should be less. The profits should be used for
further development of the firm.
5. LONG DURATION
The duration of partnership should be long. Only long
term partnerships can properly set up businesses. It
takes time to understand the business affairs.
6. NUMBER OF PARTNERS
The number of partners must be proper. If the number
of partners small, it will suffer due to lack of resources. If
the number of partners is large there is possibility of
disagreement among partners.

12. KINDS OF PARTNERS
The following are the kinds of partners according to liability,
Participation in the management, shares of profits, etc.
1. ACTIVE PARTNER
A partner who takes an active part in the management of the
firm is called active partner. He takes much interest in the
affairs of the firm, such as partner must give public notice of
his retirement from the firm in order to free himself from
liability. He is also called working partner.
2. SLEEPING PARTNER
One who doesn't take an active part in the management of
the firm is called sleeping or dormant partner. Such partner
brings only capital in the business. He is also liable to the
creditors of the firm like other partners. He is not required to
give notice to general public about his retirement from the
firm because he is not known to the general public.