In this blog, we explore the basics of the rights of partnership, highlighting their collaborative essence, shared duties, and vital ingredients for success. Learn how partnerships can fuel business growth, encourage creativity, and bring mutual benefits to companies of any size.
Meaning And Definition Of Partners
The partnership is defined by Indian Partnership Act, 1932, Section 4, as follows
“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”.
A partnership thus is a business relationship between/among two or more people to share profits and losses of the business, carried on by all or any of them acting for all.
Partners, Firm and Firm Name: The person who has partnered with one another individually are called partners and collectively a firm. The name under which the business is carried is called the firm name.
- Minimum & Maximum partners– MINIMUM =2 MAXIMUM =Silent
but due to company act 2013 describes the maximum number of partners should not be more than 50.
- IF no of the partners exceed the limit then the firm is known as an illegal firm.
- Agreement-There must be an agreement to form a partnership. This agreement may be in verbal or in writing but it is advisable, the deed should be in writing.
- An agreement must be by those people who are competent to contract.
- Business should be lawful and joint properly income like rental income is not partnership religious and charitable organization or not a partnership
Nature of Partnership
A partnership, from the legal viewpoint, is not a separate legal entity from its partner since the firm’s debts are payable from the personal assets of the partners if the firm is unable to repay its liabilities.
However, Partnership is a separate business entity from the accounting viewpoint.
Essential features of partnership
- Two or more persons– There must be at least two persons to form a partnership and all such persons must be competent to contract. According to Indian Contract Act 1872, every person expects the following to be competent to contract:
(a) a Person of unsound mind and
(b) Person disqualified by any law
- MINOR AS PARTNER-A minor can be a partner in the firm but only in profits of the firm and not in losses. A minor partner on becoming a major should accept or refuse the partnership in the firm within 6 months. If he/she does not so decide, he/she becomes liable for all the actions since he/she became a partner.
- Agreement-Partnership comes into existence through an agreement, either written or oral. It is the basis of relationships among partners, which maybe be for a particular venture, for a period or at will. The written agreement among the partners is known as Partnership Deed.
- Business– A partnership is established for a business.
- Profit sharing-The agreement between/among the partners should be to share profits and losses of the business
- Business can be carried by all or any of the partners acting for all– Business of the partnership can be carried on by all the partners or by any of them acting for all the partners. In other words, partners are agents as well as principals.
- As an agent, he represents the partners and thereby, binds them through his acts
- As a principal, he is bound by the act of other partners
RIGHTS OF PARTNERS
- Every partner has the right to participate in the management of the business.
- Every partner has the right to be consulted about the business matters.
- Every partner has the right to inspect the books of account and have a copy of it.
- Every partner has the right to share profits and losses in the agreed ratio. in case the profit-sharing ratio is not agreed upon, profits and losses are shared equally as is provided in the Partnership Act, of 1932.
- If a partner has an advanced loan, he has the right to receive interest thereon at an agreed rate of interest. In case the rate of interest is not agreed upon, interest is paid at the rate provided in the Indian Partnership Act 1932 which is 6% pa.
- A partner has the right to take decisions in the interest of the business.
- A partner has the right not to allow the admission of a new partner.
- After giving notice, a partner has the right to retire from the firm
Rights of Partnership give a powerful platform for businesses to thrive through collaboration and shared responsibilities. By embracing the fundamentals discussed in this blog, partners can unlock the full potential of their ventures. With a solid foundation in place, partnerships can become a driving force for growth, innovation, and achieving shared success.
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