The Indian partnership at, 1932 defines the meaning of a partner in section 4, stating “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”
In simpler terms, when two or more persons come together and collectively decide to join hands and conduct the business together so that they could achieve the organisation or the firm’s goals. Most of the time, primarily these goals are profits for the firm. The partnership firm could either be profit-oriented or could always be conducive to some social welfare for the betterment of society.
The partners in the firm usually either divide the profits amongst themselves in equal proportion or in any other ratio which is mutually decided by the partners.
The conduct of the partners and the partnership firm is regulated by the partnership deed. Although drafting a partnership deed is not mandatory, they can draft the deed if they want, but it is always advisable to draft the partnership deed and jot down the provisions regarding the conduct and the regulation of the partners and partnership firm.
One of the grave elements of the partnership firm is the liability of the partners is joint and several. This further means that the partners hold a joint liability, so even if one partner acts unfaithfully or fraudulently while being the partner of the firm, all the partners would hold the same liability.
Or if the firm has become insolvent, all the partners would be jointly and personally liable, meaning that the firms, as well as their personal assets, would be sold off to pay off the debts. As the partnership firm does not have a separate legal status hence, the firm and the partners are one and the same.
There are different types of partners in a firm, they are mentioned hereinafter:
- Active/managing partners: These are those partners, who take part in the day-to-day business of firms and they manage all the business or day-to-day affairs transacted in the firm.
- Sleeping or dormant partner: They have invested money for the contribution of capital, but they do not manage the day-to-day affairs of the company, they get profits equally. But they are bound by the conduct of the active partners.
- Nominal partners: There is a subset of sleeping partners, they just give their names to the firm, they do not invest in capital or get a share of profit, instead they get a royalty.
- Partner in profit only: Those partners who agree to share the profits of the firm but do not suffer the losses. These do no manage day-to-day affairs.
- Minor partner: Section 30, of the Indian partnership act, talks about minors, their liabilities in the firm, and if they can sue other partners of the firm. A minor cannot be a partner, though, with the consent of all the adult partners, the minor can get the benefit of the partnership. If the consent is given, the minor is admitted to benefits of the partnership and has all the rights as that of the adult partner. Minor is entitled to his agreed share of the property. Minor has a right to get access to the books of accounts, but such partners are not personally liable to the third parties for the debts of the firm. Although, their liability is limited only up to his shares in partnership assets and profit. Section 30(4) of the Indian partnership act 1932 talks about minor suing the other partners of the firm. Minor partners cannot bring any suit against the remaining partners. For the account for payment of his shares for profit unless, unless he first serves his connection with the firm.
- Partner by estoppel: A person is held liable as a partner by holding out or estoppel, if such conditions are fulfilled. He represented himself or knowingly allowed himself to be represented as a partner. Such representation maybe by a spoken or written word, by conduct, or by knowingly permitting others to make such representation by words or by conduct. The other party on the faith of such representation gave credit to the firm. Liability could be just as same all the other partners at the firm
Therefore, there are numerous partners in the firm, although not all are active or managing partners in the firm, all the partners have their own separate obligation to the firm, some of them are just in the partnership firm for the profits, some are just nominal, while some are sleeping partners who do not manage the day to day administration of the firm, but they do contribute monetary funds in the firm and get their share of profits.
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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