ALL ABOUT PARTNERSHIP

Meaning of Partnership: -Partnership is a special kind of Contract. Section 4 of the Indian Partnership Act 1932 defines
"Partnership". "Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any
of them acting for all.

l\lunlng of Partners: - Persons who have entered into partnership with one another are called indi,~dually, ''partners" and
collectively "a firm", and the name under which their business is canied on is called the " firm name".

Righi to partlclpat, In t,1,slntu [Stt:tlon 11(a)}: - Each partner has equal right to participate in the running of his business
Righi to txprtu opinion [Stt:tlon 11(c)J: - One of the rights of the partners is that they can freely e xpress their opinions. In the
differences of opinion of the partners in matters related to the business, partners can come to a decision by the majority of votes.
Right to acuu boo/cf and acco,mts [Stet/on 11(d)J: - Each partner can inspect and copy books of business accounts. This right is
equally applicable to active and passive partners
Righi to RtttHtntratlon Undtr Stt:tlon JJ(A):-No partner of the organization has the right to obtain compensation in addition to his
share of the company's profits for participating in the firm's business
Right to Sllart Profits Untltr Sutton H(.ISJ:-Eacb partner is entitled to an equa l share of lbe company's profits. In a similar manner,
the partnership business's losses also apply equally
Int,rest on Capital 11ndtr Stction H(c):-According to the partnership deed, if a partner contributes interest on capital, the interest will
only be paid out of earnings in that situation
Rig/It to Rtf11st tllt Entranu of a New Part,rer U,rder Sutio,r Jl :- In a partnership agreement, each partner has the power to forbid
the addition of a new partner without the approval of all the other partners
Righi to Rttirt in PartntrsllipJJ(a):-ln a general partnership, each partner bas the option to leave the company with the approval of all
the existing partners.
Righi not to bt aptlltd(ucJJ):-Every partner of a partnership firm has the right to continue in the business. A partner cannot be
dismissed from the firm by any majority of the partners.
Rig/It to Dissolve tllt Fi,,,. i,r Part,rer,lrip U,rder Sution 40:-A partner in a partnership business has the authority to terminate the
company with the agreement of all the other partners

*The duties of a parlntr nndtr thf Indian Contract Act Include:

D11ty ofgood faitlr: Every partner must act in good faith towards other partners and the partnership. They should act honestly and
avoid any acts of fraud or misrepresentation
D11ty to carry• on b11sintu: Partners have a duty to actively participate in carrying on the business of the partnership. They must
contribute their skills, efforts, and resources to promote the success of the partnership.
D11ty ofobtditnct: Partners must obey the terms and conditions of the partnership agreement. They should follow the agreed-upon
rules , decisions, and policies of the partnership.
D11ty of cart a,rd s/tlll: Partners are expected to exercise reasonable care and slcill in the conduct of partnership affairs. They should
perform their duties with the degree of diligence that a prudent person would exercise in similar circumstances.
D11ty to sllart profits and /osus: Partners must share the profits and losses of the partnership as per the agreed-upon ratio or
proportion. Unless otherwise specified, profits and losses are generally shared equally among partners.
D11ty to lndtfllnlf.v for louts: If a partner causes any loss to the partnership due to his/her 1>:.i!l.f!IJmisconduct or breach of duty, they
are personally liable to indemnify the partnership for such lo$seS.
D11ty of loyalty: Partners have a duty to act in the best interests of the partnership. They must avoid conflicts of interest and refrain
from engaging in any activities that compete with the partnership's business.
Duty to pro,•ldt tr11t acco11,r/s: Partners must keep and provide true and accurate accounts of all transactions related to the partnership.
They should maintain proper books of accounts and provide access to other partners for inspection.
D11ty to disclose inforftfatlon : Partners have a duty to disclose any relevant information or material facts lo the partnership. This
includes sharing information about personal interests, coollicts, and any other matters tbat may affect the partnership's business.
D11ty not to cofllpttt: Partners should not carry on any business similar to the partnership's business without the consent of other
partners. They should not engage in activities that may harm the partnership's interests.

Tvpes of Partners

There are different kinds of partners in a firm :

I. War/ting partner. The partner who contributes his capital and actinly participates in the business activities.
2. Slttping partnu: The partner who contributes his capital but does not ta.k:e part in business acti,ities. It is also known as a dormant
partner.
3 . Noflllnal partntr: The partner who neither contributes his capital nor takes part in the business activities of the firm. His
contribution is limited but allows other partners to make use of his name.
4 . Partner t>y estoppd: The pcnon is not a partner in the firm but by his action and conduct with oubiders, he makes them believ e that
he is also a partner of the firm. This happens when the partner is retired but people don't know about it.
5. Stt:rtt partntr: The person who is a partner of the firm but his partnership is kept a secret from the public.
6. Part,rtr by llo/d/,rg 0111: The partner who is actually not a partner in the firm but allows tbe firm to show to others that he is a
partner of the firm.

Kinds of Partnership

1. Partners/rip at will: It means that such a partnership depends upon the will of the partners and any partner can bring the partnership
to an end by giving a notice. Such a partnership is done for a particular lawful business.
2. Particular partn~rship: It means such a partnership is done for a continuous business or for a particular venture.
J. Partners/rip for a rvced period: It means when a partnership is done for a partic ular time period either for 2 years or for 5 years as
soon as the period expires the partnership automatically dissolves.
4. General partnership: It means when the partnership is done generally to carry out a bnsiness and in which the liability of each
partner is unlimited.
All ABOUT FIRM
According to sutlon 39 of Indian Partn.rsblp Act 1932 " "Dlssolutlon of the Orm mu■s dlnolutlon of parta.rshlp among all the
partn.rs la the Orm
The partnership may be dissolved due to the following reasons:
1. Due to the death of the partner.
2. Due to the admission of a new partner.
3. Due to the retirement of a partner.
4 . Due to the bankruptcy of a partner.
5. Due to the expiry of the partnership period, if the partnership is for a particular period.
l\lodu of Dissolution of a Firm

(A.) Without tht lnttrvtntion of Court: The ways for dissoluhon of a firm based on mutual decisions and without the court's
intervention are:
1. Dissolution b_v A.grutfftnt: The dissolution by agreement invoh·es the approval of all of its partners. It i.s stated that a firm is made
by the agreement of all its members. Similarly, a firm can dissolve by the agreement or approval of its members.
2. Cotffpulsory Diuol11tion: Compulsory dissolution involves two main reasons. The first reason shall be when all or one of its
members become insolvent and are now incapable of any agreement. The other reason is when the firm becomes unlawful due to any
reason.
J. Diuolution b_v Notice: Dissolution by notice involves firms that is not on the duration of the partnership. In such firms, any partner
can dissolute the firm by givi.ng notice to other partners of the firm for its dissolution.
4. Dissolution du, to a urtain ,v,nt: Beside s the above-mentioned reasons, there are three more reasons for the dissolution of a finn .
These are:
• On the completion of the reason , the firm was established
• Due to insolvency of any partner
• Tbe expiration of the period of firm formation
(BJ With th, lnt,n•,nt/on of Court: The dissolution by the court can be due to an apphcatlon filed by a partner of the firm to the court.
Tbe reasons for the dissolution by the court are as follows :
• When one of the partners of the firm becomes unsound mind. i.e. mentally unstable for handling the firm
• When any partner of the firm (other than filing a case) bas become incapable of fulfilling bis duties and responsibilities towards the
firm
• When any partner (other than filing a case) wilfully breaks any law that can harm the partnership
• When any partner (other than filing a case) transfers all of bis interests to a third party
•If the court thinks that the firm is incapable of producing any profits in I.he future and will only carry I.b e loss
Five essential elements or a partn~!fem ents Of Petemshi . .same aita e hobo
Contract:-A proper contract between the persons in business is necessary. This contracte an' t be related, inherited or imposed by law.
Partners:-For a firm to be in partnership, there must be at least two persons in the contract. There are set limits too. If there is a
Banking sector firm , there can be ten partners, whereas, in any other sector firm, it is 20. If the number of partners exceeds these
limits, the registration of the partnership firm will be declared illegal.
Business:- Business here specifically means a business I.hat is focused on making a profit. If the business is not making a profit or is a
non-profit organisation, then it can't be said to be a partnership firm registration.
Also, if two people start a new business set up by dividing the in,·estments between them, they can't be said partners unless there is a
contract between them and it is a profit-making business. They can be caUed co-owner but not partners.
Sharing of profit:-The agreement is to share profit and losses among the partners. The sharing of profit and losses can be according to
the ratio of the capital contributed or equally. It helps to distribute the burden among the partners in the case when the partnership
suffers losses.
Mutual Agenc,.,:-Any decision taken by any of the partners in the partnership needs to be followed by all. Everyone is equally
responsible for any decision taken by any partner
 9:21 @

Can minor admitted into Partnership

A person who is a minor according to the law to
which he is subject may not be a partner in a firm,
but, with the consent of all the partners for the time
being, he may be admitted to the benefits of
partnership.Section 30(1) in The Indian Partnership
Act, 1932.
Rights of a Minor Partner
Once the minor is given the benefits in a
partnership there are certain rights that he enjoys.
Let us take a look at the rights of a minor partner.

**A minor partner will obviously have the right to his

share of the profits of the firm . But the minor
partner is not liable for any losses beyond his
interests in the firm . So a minor partner's personal
assets cannot be liquidated to pay the firms
liabilities.
**He can also like any other partner inspect the
books of accounts of the firm . He can demand a
copy of the books as well.
**If necessary he can sue any or all of the other
partners for his share of the profits or benefits.
**A minor partner on attaining majority has the right
to become a partner of the firm. He has six months
from attaining majority to decide if he will execute
this right. Whether he decides to become a partner
or not he must give public notice about the same.

1±1 0 Edited 9:21 pm

 9:20 ; ~ 1· (9

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Difference between Partnership Visit

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