Partnership act

Introduction
 Meaning
In a partnership firm, two or more people come
together to carry out a business for the purpose of
earning profits and sharing those profits. The
partners combine their capital resources and work
jointly to carry on the business. According to
Section 12 of the Indian Partnership Act, a
partnership must be formed for the purpose of
carrying a business that is legal in nature. Co-
ownership of a property is not considered as a
partnership.
 ESSENTIALS
 There must be an agreement between the partners to carry on the business of the
partnership firm.
 The aim of the formation of the partnership should be to earn profits and share
them among partners. The sharing of profit and losses can either be according to
the ratio of the capital contributed by each partner or be equally among all the
partners unless otherwise specified.
 The partnership agreement must state that the business will be jointly carried on
by all of them or some of them acting on the behalf of all. According to Section
13 of the Partnership Act, 1932, the mutual agency exists between the partners.
Every partner in a partnership acts as a principal as well as an agent for other
partners. The actions of a partner are binding on the actions of all the other
partners.
 Unlimited Liability- The partners can be held liable jointly for any debts of the
firm. They have an unlimited liability that extends to their private assets for the
disposal of the firm’s debts.

 Number of Partners in a Partnership

 According to the Indian Partnership Act, there is no limit

on the maximum number of partners that can be there in
partnership but there must be a minimum of two
partners. However, according to Companies Act 2013,
the maximum number of partners must not exceed 100
in case of a partnership. If the number of members in a
partnership exceeds 100 then it is termed as an illegal
association as per Section 464 of the Companies Act,
2013. As per Section 11 of the Companies Act, the
maximum number of partners for banking purposes is
10 and for other purposes is 10.
 Partnership Deed

The partnership agreement forms the basis of a partnership. It

is the foundation that creates a legal relationship between the
partners to carry out the business of the partnership firm. A
partnership agreement can either be written or oral but in the
written format it is known as the partnership deed. Some of the
details mentioned in a partnership deed are as follows.
 Name and address of the partnership firm as well as that of the
business
 Name and address of all the partners
 Rights, duties, and obligation of partners
 Profit and loss sharing ratio
 Capital contribution by each partner
 Partnership Deed

 Rate of interest on capital, loan, drawings

 Settlement of accounts in the event of the dissolution
of the firm
 Mode of settlement in the event of disputes among
partners
 Salaries and commission payable to partners
 Rules to be followed in the event of the admission of a
new partner, retirement and death of an existing partner
 Any other provisions affecting the rights of the
partners.
 Essential Features of a Partnership

 Two or More than Two Persons – in order for a firm to come

into existence, it should involve two or more than two partners,
who have a vested interest in a common goal. However,
according to section 464 of the companies act of 2013, the central
government has prescribed a limit on the maximum number of
partners a firm can hold. Therefore, According to the central
government, the maximum number of partners a firm can hold is
50.
 Legal Agreement- Partners who come together to form a firm,
already have a mindset that they will be sharing both profits and
losses of the firm equally. These agreements, if made orally are
valid however it is advised to get these agreements written in a
legal form to avoid disputes in the future
 Essential Features of a Partnership
 Partners in Business- In order to be partners in business,
there should be some business going on in the firm that only
then can they be called Business partners and only then can
the Indian partnership act of 1932 be applicable to them.
 Mutual Agreements - In order for a partnership to take
place, a Mutual agreement on the mutual agency is
extremely important. Partners of a firm can make rules and
bind other partners to it and also bound to the rules that are
made by other partners of the firm. Every partner is allowed
to make decisions and conduct the affairs of the business
according to him/her
 Types of Partnerships

A partnership is divided into different types depending on

the state and where the business operates. Here are some
general aspects of the three most common types of
partnerships.
 General Partnership
A general partnership comprises two or more owners to
run a business. In this partnership, each partner represents
the firm with equal right. All partners can participate in
management activities, decision making, and have the
right to control the business. Similarly, profits, debts, and
liabilities are equally shared and divided equally.
 Types of partnership
 Limited Partnership
In this partnership, includes both the general and limited
partners. The general partner has unlimited liability, manages the
business and the other limited partners. Limited partners have
limited control over the business (limited to his investment).
They are not associated with the everyday operations of the firm.
 Limited Liability Partnership
In Limited Liability Partnership (LLP), all the partners have
limited liability. Each partner is guarded against other partners
legal and financial mistakes. A limited liability partnership is
almost similar to a Limited Liability Company (LLC) but
different from a limited partnership or a general partnership
THANK YOU