PARTNERSHIP ACT

Learning Objectives

Definition of Partnership Formation of Partnership Test of Partnership Partnership and Joint Hindu Family Partnership and co-ownership Registration of Firms Effect of Non- Registration Rights and Duties of a partner Types of Partners Dissolution of Firm

Nature of Partnership
Definition: 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.

Essential Characteristics

Association of two or more persons (max. no.)

Agreement Business Sharing of profits Mutual agency

Test of Partnership

Partnership and Joint Hindu Family

Mode of creation Admission of new members Minor members Maximum number of members Female members

Authority of members
Liability of members Registration

Partnership and co-ownership

Mode of creation Business Transfer of interest Number of members Authority of members Partition of property Lien for expenses

Registration of firms

Registration

Application to be submitted along with following documents:

- name of firm, place of business, date of joining of each partner, names and addresses of each partner etc.

Effect of non-registration

Suits b/w partners and firm Suits b/w firm and third parties

Rights of a partner

Right to take part in Business Right to be consulted Right of access to a/c Share profits Interest on capital Interest on advances

Right to be indemnified
As agent of firm Consent for admission of new partner Right to retire

Right not to be expelled

Duties of a partner

To carry on Business to the greatest common advantage To observe faith To indemnify for fraud To attend diligently Not to claim remuneration To share losses

To indemnify for wilful neglect

To hold and use property of the firm for Business purpose only To account for personal profits To act within authority

Not to assign his rights

Types of Partners

Actual Partner Sleeping or Dormant Nominal (lends his name) Partner in profits only Sub-partner(sharing of profits)

Partner by estoppel
Partner by holding out

Dissolution of Firm

Complete breakdown or extinction of relationship between all the partners of a firm

Modes of dissolution
Dissolution without the order of Court

Dissolution by agreement Compulsory dissolution(insolvency) Contingencies(term completion, completion of Business objective) By notice (partnership at will)

Dissolution by Court

Insanity or misconduct
Persistent breach of agreement Transfer of interest Business working at a loss

Settlement of Accounts(Sec.48,49 and 55)

Sale of Goodwill
Sharing of Deficiency(profits, capital,individually) Application of assets(outside debts,advances given by partners, refund of capital, ratio of profit sharing)

Settlement of debts of the firm (first out of property of firm then out of private property)