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RIGHTS, DUTIES AND

LIABILITIES OF PARTNERS
• RIGHTS OF PARTNERS
• DUTIES OF PARTNERS
• LIABILITIES OF PARTNERS
Rights, duties and liabilities of partners:
Generally, the rights, duties and liabilities of partners are laid down in the partnership deed. In
case the partnership deed does not specify the rights and duties the provisions of partnership
act 1932 will apply.

1) RIGHTS OF PARTNERS :

• every partner has a right to take part in conduct and management of business.
• right to express opinion.
• right to be consulted before taking decisions.
• right to inspect and take copy of books of account and records of firm.
• right to an equal share.
• right to receive interest.
• equal right to use the assets.
• right to retire from the firm.

2) DUTIES OF PARTNERS :

A. ABSOLUTE DUTIES .

B. QUALIFIED DUTIES.
A. ABSOLUTE DUTIES :
 absolute duties are fixed by law which cannot be violated by partner’s agreement.

 every partner must act diligently and honestly in the discharge of his duties.

 every partner must act in a legal and faithful manner.

 every partner must act within the scope of authority.

 every partner is bound to share the losses of the firm equally unless otherwise agreed.

 no partner can transfer or assign his interest in firm to others without consent of others.

 every partner must maintain and render true and correct accounts.

 every partner should use firm's property only for firm's business and interest.

 no partner can make any secret profit by way of commission.

B. QUALIFIED DUTIES :
 qualified duties given in the act can be modified by an agreement of partners entered into.
3) LIABILITIES OF PARTNERS :
 Every partner is liable for the debts of the firm to an unlimited extent, jointly and severally.

 A retiring partner is liable for all the debts incurred before his retirement.

 An incoming partner is liable only for debts incurred by firm after his admission into the partnership.

 In case of deceased partner, his legal representatives are liable only for the debts.

 In case of minor partner he is not personally liable for debts of firm.

 Every partner is liable to make good the loss that the firm or other partners suffer as a result of his
negligence.
PARTNERSHIP DEED
 CONTENTS OF PARTNERSHIP DEED.
 REGISTRATION OF FIRM.
 PROCEDURE FOR REGISTRATION.
 EFFECTS OF NON- REGISTRATION
PARTNERSHIP DEED:
A partnership firm can be formed through an agreement among two or more persons.
In India this agreement may be oral or in written. But it is desirable to have it in writing to avoid any
misunderstanding among the partners in future.
All the terms and conditions of partnership are included in the agreement. The partnership agreement is also
known as partnership deed.

CONTENTENTS OF PARTNERSHIP DEED :


A partnership deed will usually provide for the following matters.

1) Name of the firm.


2) Date of agreement and principal place of business.
3) Names and addresses of all the partners.
4) Nature of business proposed to be carried on by firm.
5) Duration of partnership if any.
6) Amount of capital contributed by each partner.
7) Amount of withdrawal of each partner.
8) Profit sharing ratio .
9) Salary payable to active partnership or partners.
10)Interest on capital and interest on drawings.
11)Procedure for admission or retirement of partners.
12)Maintenance of books of accounts and their audit.
13)Interest to be allowed on partner’s loan and advances to firm .
14)Procedure for settlement of disputes among partners by arbitration.
REGISTRATION OF FIRM :
Registration of a partnership firm in India is not compulsory. It is only optional . Indian partnership
ac, 1932 , provides that if the partners so desire, that may register their firms with the registrar of
firms of the state.

PROCEDURE FOR REGISTRATION :


A partnership firm can be registered at any time by filling a statement in the prescribed form. The
form should be duly signed by all the partners.
It should be sent to the registrar of firms along with the prescribed fee. The statement should
contain the following particulars.

 Name of the firm.


 Principal place of its business.
 Name and address of each partner .
 Date of admission of each partner .
 Date of commencement of business of the firm.
 Duration of the firm.
EFFECTS OF NON – REGISTRATION :
Registration of partnership is only optional in India. But if a firm in not registered, it has to face the
following drawbacks :-

 an unregistered firm is not registered it has against third – parties.

 the firm cannot take legal action.

 any third party can take legal action.

 an unregistered firm cannot enforce its claims against third parties.

 the firms forfeits its right in restricting the outsiders.

DISSOLUTION OF PARTNERSHIP FIRM :

Dissolution of partnership firm means putting an end to the relationship among the partners.
Two types of dissolution, they are.
 Dissolution of firm.
 Dissolution of partnership.
1. DISSOLUTION OF FIRM :

 Dissolution of firm means dissolution of partnership on dissolution of firm, partnership business comes to an
end.

 Its assets are realized and the creditors are paid off. The business cannot be continued after dissolution of
partnership firm. E.g. A, B, C are partners in a business. If all the three partners decide to dissolve; it is
known as dissolution of firm.

2. Dissolution of partnership :

 Dissolution of partnership means the termination of the original partnership agreement.

 A partnership is dissolved by insolvency, retirement, expiry of completion of term of partnership.

 The business will continue after dissolution of partnership.

E.g. A, B, C are partners in a business. If “A” retires, “B” & “C” can continue the business which is known as
dissolution of partnership.

The various circumstances leading to dissolution of partnership firm can be summarized by taking the first
letters used in the term “ DISSOLUTION”.
D- Death of partner.
I - incapacity of partner.
S - Stipulated period of partnership completed.
S - Serious misconduct of a partner.
O- Object is completed (particular partnership).
L- Lunacy of partner.
U- Unavoidable continuous loss.
T- Transfer of interest of the firm.
I - insolvency of partner.
O- Objectionable unlawful objectives.
N- Notice of dissolution by partner.