Submitted By-

Pramita Ghosh&

MITHUN GHOSH

THE INDIAN

PARTNERSHIP

ACT,1932

Content PG no.INTRODUCTION 4SALIENT FEATURES 5HOW PARTNERSHIP REGISTERED 6PROCEDURE 7HOW PARTNERSHIP FORMED 9AGGREEMENT 10ESSENTIALS RIGHTS AND DUTIES OF PARTNERS 13RIGHTS AND DUTIES 14 COMPANY VS PARTNERSHIP 17 SHARING OF PROFIT 20ACCOUNTING TREATMENT 21 DISSOLUTION OF A PARTNERSHIP FIRM 22

Section-4 of a partnership as ‘the relation between persons who agreed to share profit of a business carried on by all, or by any of them acting for all’. According to sir F.POLLOCK,A partnership is the ‘relation which subsist between the persons who have agreed to share the profits of a business carried on by all, or any of them on behalf of all of them.’

SALIENT FEATURES:-

To constitute a partnership. There must be a contract at least two persons are required.

The partnership act does not lay down any maximum number of partners.

According to section-11 of the company act ,a partnership for a banking business must not have more than ten partners.

For other business ,partners must not have more than twenty partners.

There must be an agreement between the partners to share the profit(including negative profit i.e. losses)of a business.

HOW PARTNERSHIP REGISTERED:- A registered partnership firm is one which is duly registered with the registrar of firms, in ac accordance with the procedure laid down under section-58.

PROCEDURE:-The following are the procedure for registration of partnership firm:-

It must be registered, any time, with the registrar of firm of the area where the business of the firm is situated, or is proposed to be situated.

A detail statement must be sent to the registrar of firms of the respective area on a form, prescribed for the purpose along with the amount of the fee, prescribed for registration.

The prescribe forms contains inter alia.

PROCEDURE:-

The statement must be sign by all the partners personally, or by there agent on there behalf, specially authorized for the purpose.

All such signature (i.e. of their agents),must be verified as well.

Such statement may be sent by post or may be delivered personally to the registrar of firms concerned.

HOW PARTNERSHIP FORMED:-ORAL OR WRITTEN AGREEMENT- As per normal provision of contract, a ‘partnership’ can be formed by written or oral agreementSHARING OF PROFIT NECESSARY- The partners must come together to Share profit NUMBER OF PARTNERS- There must be minimum two partners.MUTUAL AGENCY IS THE REAL TEST - The real test of ‘partnership firm’ is ‘mutual agency’, i.e. whether a partner can bind the firm by his act, i.e. whether he can act as agent of all other partners.

AGREEMENT:-NAME OF THE BUSINESS:-Name of the business

should be specified with the partners.TERM:-Business date should be specified and

shall start the business either it will terminated.CAPITAL:-The capital of the partnership shall

be contributed in cash by the partners.PROFIT AND LOSS:- The net profits of the

partnership shall be divided equally between the partners and the net losses shall be borne equally by them

AGREEMENT:-SALARIES AND WITHDRAWLS:-Neither partner shall receive

any salary for services rendered to the partnership. Each partner may, from time to time, withdraw the credit balance in their income account.

INTEREST:-No interest shall be paid on the initial contributions to the capital of the partnership or on any subsequent contributions of capital.

DUTIES AND RESTRICTION:-The partners shall have equal rights in the management of the partnership business, and each partner shall devote their entire time to the conduct of the business.

BANKING:-All funds of the partnership shall be deposited in its name in such checking account or accounts as shall be designated by the partners

AGREEMENT:-BOOKS:-The partnership books shall be maintained at the

principal office of the partnership, and each partner shall at all times have access thereto.

VOLUNTARY TERMINATION:-The partnership may be dissolved at any time by agreement of the partners, in which event the partners shall proceed with reasonable promptness to liquidate the business of the partnership.

DEATH:-Upon the death of either partner, the surviving partner shall have the right either to purchase the interest of the decedent in the partnership or to terminate and liquidate the partnership business.

ARBITRATION:-Any controversy or claim arising out of or relating to this Agreement, or the breach hereof, shall be settled by arbitration in accordance with the rules, then obtaining of the AMERICAN ARBITRATION ASSOCIATION.

ESSENTIALS:-ASSOCIATION OF TWO OR MORE PERSONMUST EMERGE OUT OF AN AGREEMENT.MINOR CANNOT BE MEMBER OFA PARTNERSHIPPARTICULAR PARTNERSHIPMUST BE TO CARRY ON SOME BUSINESSMUST BE TO SHARE THE PROFIT OF THE BUSINESSACTIVE PARTNERS AND SLEEPING PARTNERSPARTNERS AS AGENT OR PRINCIPAL OF OTHER

PARTNERSTHERE AS AGENT OR PRINCIPAL OF OTHER

PARTNERS

RIGHTS of a partner:-Right to take part in the conduct of the business of

the firm.Right to share equally the profit of the firm.Right to express his opinion on any matter.Right to be the joint owner of the property of the firm.Right to take in an emergency all such action as are

reasonably necessary to protect the firm from any loss.

Height not to be expelled.Right to retire.Right to carry on an competing business, but only

after retirement.Right as an retiring partner to share subsequent profit

profit of the firm, under certain circumstances.

DUTIES of a partner:- It is the duty of each partner to indemnify the firm for

the losses caused to it due to the fraud committed by him during the conduct of the firm’s business.

Partner is duty-bound not to carry on any business other than the firm’s own business, so long as he continues to be a partner of that firm, if he is restrained by an agreement to this effect with the other partners.

It is the partner’s duty to indemnify the firm for any losses suffered by it, due to his willful negligence in the conduct of the firm’s business.

It is the duty of each partner to attend to his duties in the conduct of the firm’s business diligently, and that too, without any remuneration.

DUTIES of a partner:- A partner is duty-bound to account for all the profits that

ha makes, even secretly, from any transaction of the firm, or from the use of any of the properties of the firm, or the business connections of the firm, or even by using the name of the firm.

I case a partner happens to carry on some business that competes with the firm’s own business, he will have to account for and pay to the firm all the profits made by him in that competing business.

A partner is duty-bound not to assign his own share to some outside party, the partnership itself may be dissolved.

As per duty, all the partners are required to contribute to the losses of the firm in equal proportion, unless otherwise agreed upon between the partners.

COMPANY VS PARTNERSHIP:- Formation: A company is created by registration  under

the Companies Act. A partnership is created by agreement Status At Law: A company is an artificial legal person

with perpetual succession. A partnership is not a legal though it may sue and be sued in the firm’s name. Thus the partners own the property of the firm and are liable for the contracts of the firm jointly as well as severally.

Transfer Of Shares:  Shares in a company are freely transferable unless the company’s constitution otherwise provides; restrictions may , of course , appear in the articles of a private company. A partner can transfer his shares in the firm , but the assignee does not thereby become a partner and is merely entitled to the assigning partner’s share of the profits.

COMPANY VS PARTNERSHIP:-NUMBER OF MEMBERS: A private company must

have at least two members and maximum 50 members. A partnership cannot consist of more than 20 persons (10 persons in case of banking business).

MANAGEMENT: Members of a company are not entitled to take part in the management of the company unless they become directors. Partners are entitled to share in the management of the firm unless the articles provide otherwise.

AGENCY:A member of a company is not an agent of the company or that of other members . Each partner is an agent of the firm and his partners.

COMPANY VS PARTNERSHIP:-LIABILITY OF MEMBERS: The liability of a member of a

company may be limited by shares or by guarantee. The liability of a partner is unlimited.

POWER: The company can only operate within the objects laid down in the memorandum of association, though these can be altered to some extent by special  resolution. Partners may carry on any business as they please so long as it is not illegal and make whatever arrangements they wish with regard to the running of the firm from time to time.

TERMINATION: No one member of a company can wind up the company. A partnership may be dissolved by any partner at any time unless the partnership is entered into for a fixed period of time.

SHARING OF PROFIT:- The partners must come together to share profits. Thus, if

one member gets only fixed remuneration (irrespective of profits) or one who gets only interest and no profit share at all, is not a ‘partner’. - - Similarly, sharing of receipts or collections (without any relation to profits earned) is not ‘sharing of profit’ and the association is not ‘partnership’. For example, agreement to share rents collected or percentage of tickets sold is not ‘partnership’, as sharing of profits is not involved. - - The share need not be in proportion to funds contributed by each partner. - - Interestingly, though sharing of profit is essential, sharing of losses is not an essential condition for partnership . - - Similarly, contribution of capital is not essential to become partner of a firm.

ACCOUNTING TREATMENT:- No salary or commission is payable to the partner for

participating in the business.  Sharing profits and losses equally, unless

mention in the deed.  No interest is payable on capital, unless mention

in the deed. It is only payable on profit. Interest on loan given by partners at 6%p.a.

unless mention in the deed. It is payable even if there is no profits.

No interest is payable on drawings unless mention in the deed.

By mutual agreement;

By notice of dissolution;

By operation of law;

By the happening of certain contingencies;

By a decree of the court

DISSOLUTION OF PARTNERSHIP FIRM:-