Partnership.

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Presentation transcript:

Partnership

LAW OF PARTNERSHIP Essentials, Advantages & Disadvantages, Rights & Duties and Dissolution of partnership

Law Of Partnership. Definitions Partnership is a business unit owned by more than one person. Is a voluntary association of two or more persons, who contribute, money, property, time or skill to carry on as co-owner of a lawful business for profit and to share the losses and profits of that business. Partners: the owners of such business are called partners.

ESSENTIALS OF PARTNERSHIP Agreement: a partnership is the result of an agreement between persons who want to form a partnership. An agreement may be written or oral. Number of partners: according to section 14 of company’s ordinance, 1984 a partnership consisting of more than 20 persons for carrying on any business is illegal.

ESSENTIALS OF PARTNERSHIP CONT …. Existence of business: the partners must agree to carry on a business. If the purpose is to carry on some charitable work, it will not be a partnership. Sharing of profits: the agreement between the parties must be to share the profits of a business. The profit will be distributed among the partners according to their agreement.

ESSENTIALS OF PARTNERSHIP CONT - - - 5. Duration: the partnership continues at the will of the partners. It comes to an end if any of the partners retires, dies or becomes insolvent. However, if the remaining partners agree to continue the business, the firm will not dissolve.

KINDS OF PARTNERS Active partner: a partner who takes an active part in the management of the firm is called active partner. Sleeping partner: one who does not take an active part in the management of the firm is called sleeping.

KINDS OF PARTNERS cont. ….. Nominal partner: one who lends his name and reputation to the firm is called nominal partner. He does not invest in business. He does not get share in profits. But, he is regarded as partner in the eye of law.

KINDS OF PARTNERS cont.. Senior partner: a partner who has made more investment in the firm and receives more profit is called a senior partner. Junior partner: a junior partner is the one who has a small investment in the business and receives a nominal share in the profits.

KINDS OF PARTNERS cont. …. Partner in profits only: he is a partner who shares the profits of the firm but is not liable for the losses. But he is equally liable as other partners to the outsiders.

TYPES OF PARTNERSHIP Partnership at will: where no provision is made in the contract regarding the duration of partnership. Particular partnership: where partnership is formed to do a particular business. Such partnership is dissolved immediately after the completion of that business.

Advantages and disadvantages of partnership Can raise more capital. Work is distributed among the partners, this reduce the workload for each partner. Different talents are combined, such that each partner is assigned the responsibility which he/she can perform best. Losses and liabilities are shared among the partners in partnership. Consultation and sharing ideas among partners may lead better decision.

Decision making may be slow as all partners have to be consulted. Disadvantages Mistake made by one partner may result in losses which are shared by all the partners. Continued disagreement among the partners termination of the partnership. Decision making may be slow as all partners have to be consulted. A hard working partner may not be rewarded in proportion to his/her effort because the profit are shared among all partners

RIGHTS OF PARTNERS Right to take part in business: it is not essential for every partner to take part in business but the right of participation should be available to every partner. Right to share profits.

RIGHTS OF PARTNERS cont. .. 3. Right to give consent. 4. Right to retire: a partner can retire with the consent of other partners or according to the agreement or by giving notice to all the partners.

DUTIES OF PARTNERS Duty to carry on Business: it is the duty of every partner to carry on the business of the firm for the common advantage. Duty to be just and faithful: the partners should be faithful and just towards the firm and towards other partners in their actions specifically in maintaining the firm’s accounts.

DUTIES OF PARTNERS cont. .. Duty to indemnify: every partner is bound to indemnify the firm for any loss caused to it by his conduct like fraud or misrepresentation. Duty not to transfer his shares without the consent of other partners.

Law of contract principles. Source Of Law partnership act 1961 (revised 1974) based on English partnership act 1890. Law of contract principles.

DISSOLUTION OF PARTNERSHIP A firm may be dissolved with the consent of the partners. A firm is compulsorily dissolved if all the partners except one, become insolvent If a firm is constituted for a certain term, then it stands dissolved after the expiry of the term.

DISSOLUTION OF PARTNERSHIP cont. … 4. A firm may be dissolved by the order of the court if any of the partners files a suit for the same on any of the following grounds: A partner has become of unsound mind. A partner has become insolvent A partner has committed breach The firm is running on losses

DISSOLUTION OF PARTNERSHIP cont. ……. 5.Where the partnership is at will, any partner giving notice in writing to all the other partners may dissolve the firm.

END