Meaning of Partnership:
A partnership, as distinguished from a corporation, is not a separate entity from the individual owners. The partnership income tax is paid by the partnership, but the profits and losses are divided among the partners, based on their agreement. A partnership, as distinguished from a corporation, is not a separate entity from the individual owners. The partnership income tax is paid by the partnership, but the profits and losses are divided among the partners, based on their agreement.
Advantages of Partnership Firm
It can be established easily because there is no complex legal formality. It is not necessary to fulfill time consuming legal procedures. It can be established under the agreement between the partners and register in the concern department of Government paying nominal amount. So it is easy to establish.
The losses incurred by the firm will be shared by all partners in orders to their investing ratios. So, loss of each partner will be less in comparison to sole trading concern.
As a partnership is free from legal formalities and restrictions, partners can change capital, profit sharing ratio, pricing policy, managerial duties and lines of business. Charge depending on the flexibility basis of mutual understanding among partners.
What are the necessary elements that are required to form a partnership?
Three elements are necessary to form a partnership:
1. There must be an agreement between two or more persons.
2. The agreement must be to share the profits of the business.
3. All partners together, or any one, on behalf of the others must carry on the business.
I am not a citizen of India. Can I be a partner in an Indian firm?
The Partnership Act does not prohibit a non-citizen from joining an Indian partnership firm, subject to necessary clearances and permissions from satisfactory authorities in this regard.
What is the capital of a partnership firm?
Capital is the initial amount in cash or kind contributed by the partners to start the business. It is not necessary for each partner to contribute equally to the capital. Contribution is based on the agreement between the parties.
Is a deed of partnership necessary?
It is not compulsory for a partnership deed to be in writing. Partnerships can also be oral.
Who can be partners?
Partners must be major (above the age of 18), should be sane and should not be disqualified by law from entering into a contract.
I have a minor son. Can he be a partner in my partnership firm?
No, a minor cannot become a partner. However, your minor son can be admitted to the benefits of the partnership firm. He can share the profits of the partnership business with the consent of the other partners. He can also access, inspect and copy the accounts of the firm. Though the minor is not personally liable for the losses of the firm, his share in the partnership business is liable for the losses incurred.
Can a minor admitted to the benefits of partnership, become a partner on attaining majority?
A minor admitted to the benefits of partnership, has the option to become a partner within six months of attaining majority. He has to give a public notice stating his acceptance or rejection of partnership. In the absence of a notice, it is considered that he has become a partner of the firm.
I am a partner in a firm. What are my rights?
The following are the rights of a partner:
1. To take part in the business.
2. To share the profit or loss of the business.
3. To inspect and make copies of the books of the firm.
4. To receive remuneration for taking part in the business if specified in the partnership deed.
5. To receive interest on capital if specified in the partnership deed.
What are my limitations as a partner?
As a partner you cannot do the following without the consent of the other partners: 1. Submit a dispute relating to the business to arbitration. 2. Open a bank account on behalf of the firm in your own name. 3. Compromise or relinquish any claim or portion of a claim of the firm. 4. Withdraw a suit or proceeding filed on behalf of the firm. 5. Enter into partnership with an outsider on behalf of the firm. 6. Acquire or transfer immovable property belonging to the firm. 7. Admit any liability in a suit or proceeding against the firm.