A Partnership is a legal relation between persons who have agreed to work together to perform certain business activities. The persons in a partnership have agreed to share the profits in the desired ratio of the business carried on by all or by some of them.
A Partnership is defined as the relationship between who have agreed to share profits of a business carried on by all, or by any of them acting for all.
1. Partnership is an association of two or more persons.
2. Partnership should be the result of an agreement between two or more persons.
3. The agreement must be to carry on some business.
4. The agreement must be to share the profits of the business.
5. Business must be carried on by all or any of them acting for all.
1. Unlimited liability.
2. No separate legal entity.
3. Restriction on transfer of interest.
4. Unanimity of consent.
5. Utmost good faith.
Formation of Partnerships:
While forming a Partnership firm, the following points must be kept in mind:
1. The Partnership Act provides that a minor may be admitted to be a beneficiary of a Partnership.
2. No consideration is required to create a Partnership. A Partnership is an extension of an agency for which no consideration is necessary.
3. The Partnership agreement may be expressed or implied.
4. An alien friend can enter into a partnership an alien enemy cannot.
5. A person of unsound mind is not competent to enter into a Partnership.
6. A company incorporated under the companies act, 1956 can enter into a contract of Partnership.
7. According to section 5 of the Partnership Act, the following persons cannot be treated as partners:
A. The members of a HUF carrying on a family business.
B. A Burmese Buddhist husband and wife carrying on a business.
A Partnership between persons can be established through an agreement, which can be written or can be oral. But an oral agreement may cause disputes in a future periods. So it is better to have a written agreement between the partners.
A Partnership deed is a written agreement made between the partners which contain all the rights and duties of the partners, the name and objectives of the Partnership business, address and other details. This Partnership deed is then the basis of functioning of the partnership business.
Types of Partnerships:
1. Partnership at will: As per section 7 of the Partnership Act, when there is no duration specified for a particular Partnership, the Partnership is made at will. Such a type of Partnership can be dissolved at any time by any partner after giving prior notice in the firm.
2. Particular Partnership: This refers to a partnership made for a particular purpose and gets dissolved on the completion of that purpose. For example, construction of bridge, dams, road, etc.
3. Partnership for a fixed period of time: A Partnership made for a particular period is known as Partnership for a period. The periods may be decided by the partners by mutual understanding. The terms of this kind of Partnership may be one year, two years or any fixed period.
All members’ joint efforts result in the successful completion of tasks and that task or job can be easily done. Work division leads to increased work efficiency among different partners. If some work is done through the consent of all members and some profits are earned, then they are shared between the various partners. And likewise, if there is some loss then it is borne by all members and not just one has to take responsibility or compensate for it. The partnership is, therefore, a good way to do business in my view than a single person owned company. While limited liability companies have replaced partnership enterprises in complex enterprises, professional and small companies continue to prefer partnerships in India and overseas.
The Indian Partnership Act, 1932 provides for a common type of company that is the most prevalent in India, but over time, due to its inherent disadvantages, a common form of partnership has lost its charm, the main aspect of which, is the unlimited liability for business debts and the legal consequences for all partners regardless of their holdings, since the company is not a legal entity. These are statutory positions that cannot be altered by contract inter-se, although unscrupulous partners sometimes resort to subterfuges to avoid personal liability.
I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.
If you are interested in participating in the same, do let me know.
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