INDIAN PARTNERSHIP ACT

INDIAN PARTNERSHIP ACT 1932BYPUJA H.PAVINASH A.PKRISHNA PRASAD PARV SHUKLA ANIRUDH N.MSACHIN KUMAR DONGRE

WHAT IS PARTNERSHIP???The relationship between persons who have agreed to share the profits of a business.

As per Sir Fredrick Pollock. The English Partnership Act, 1890 defines partnership as The relation subsisting between persons carrying on business in common with a view to profits.COMMENCEMENT OF ACT Received the assent of the Governor- General on 8th april-1932.

It came into force on the 1st day of October, 1932, except section 69 which had come into force on the 1st day of October, 1933.

It extends to the whole of India except the State of Jammu and Kashmir.

TYPES OF PARTNERSACTIVE OR MANAGING PARTNERS:

Engaged in actual conduct of business.

His acts binds the firm and other partners.

Notice to be given in case of retirement.

SLEEPING PARTNERS:

Does not take part in conduct of business.

Contributes his share of capital and enjoys profits and losses.

Not known to outside world.

Not liable to third parties for the acts of the firm.

Not required to give notice in case of retirement.

NOMINAL PARTNER:

No real interest in business, does not contribute any capital but lends his name and capital to the firm.

No share in profits but liable to third parties for all acts of the firm.

Alsocalledlimited partneror ostensible partner.

For example: All the brand ambassadors of the company who only lend their name for the betterment of the company as to increase the reputation of the company.PARTNER IN PROFITS ONLY No interest in management of the firm. Shares the profits but not losses. Liability for the acts of the firm is unlimited.

SUB-PARTNER and MINOR AS A PARTNERare the other types of partners.

TYPES OF PARTNERSHIPS PARTNERSHIP AT WILL

No provision in contract between the partners for duration of partnership and determination of partnership.

If any partner gives notice of dissolution in writing, the partnership is dissolved.ON THE BASIS OF DURATIONPARTNERSHIP FOR FIXED PERIOD Duration is fixed

Partnership comes to an end when the term expires.

If partners continue the business after the fixed period, it becomes partnership at will.

PARTICULAR PARTNERSHIP

A person may become a partner with another person in particular adventures or undertakings.

On completion of such a venture, the partnership comes to an end.ON THE BASIS OF EXTENT OF BUSINESS DUTIES OF PARTNERSLoyalty and Good Faith:

Each partner must act in good faith toward the other partners

A partner cannot promote a competing business, and if he does so, he can be liable for any damages sustained by the partnership.

Respect the Partnership Agreement:

Each partner is bound to obey the restrictions, rules and limitations laid out in the partnership agreement.

Information:

A partner has the duty to inform the partnership of all matters relevant to the partnership.

Inspection of Books:All partners are equally entitled to inspect the books of the partnership.

Share of Profits:

Each partner is entitled to a share of the profits.

In the absence of such an agreement, each partner is entitled to an equal share of the profits.

Cover Company Losses:

If the company experience a loss, damages or levies as a result of a lawsuit or injury, partners are obligated to contribute to covering those costs.Repayment of Loans:

A partner is entitled to reimbursement of money advanced to the partnership, such as travel expenses incurred on partnership business.

Distribution of Capital:

If a partnership is dissolved, every partner is entitled to receive a share of the partnership property after due payment of all creditors and the repayment of loans made to the partnership by the partners.

DISSOLUTION OF THE FIRM By mutual consent.

By agreement.

By the insolvency of all the partners.

Business becoming illegal.DISSOLUTION OF PARTNERSHIP Expiry of term.

Completion of adventure.

Death of a partner.

Insolvency of partner.

Retirement of partner.

CHARACTERISTICS OF PARTNERSHIP.A partnership does not require property, services rendered jointly will also constitute a partnership.

Partnership is not a product of status like the joint stock companies.

Partnership can arise out of a contract only and not from status as per Section 5 of the Indian Partnership Act.

Limits is min-2 to max -10 in case of banking business and 20 for others.

The agreement of partnership has to fulfil all essentials of a valid contract.

A person may become partner in particular adventures or undertakings as per Section 8 of the IPA. But a partnership does not exist between the members of a charitable society or religious association or a building scheme.

The agreement must be to share profits of the business, trade or undertaking. Unless otherwise so agreed, sharing of profits also involves sharing of losses.

It is not necessary that all the partners must be actively participate in the conduct of the business. But a retired partner is not a partner. His annuity is mere recognition of past services.

Formal or written agreement is not necessary. An agreement to create the partnership can rise from the conduct of the parties too. The deed of partnership is not needed as per law but an instrument of partnership is of great assistance in income tax assessment.

The validity of a partnership firm does not depend upon the capital contribution by partners.

The word partnership is derived from the term to part that means to divide. And the division of profits is an essential condition of the existence of a partnership.DIFFERENCE BETWEEN CO-OWNERSHIP AND PARTNERSHIPCO-OWNERSHIP:

In the co-ownership, property is owned jointlywithout any intention to carry on business. Example:

Two or more persons purchase a car without any idea of giving it on hire, it is co-ownership.

BASIS OF DIFFERENCEPARTNERSHIPCO-OWNERSHIPPROFIT SHARINGprofit sharing is the basic object of partnership formation.There is no concept of profit and loss sharing.CREATIONAgreement or contract is essential in PARTNERSHIPWhere as agreement is not essential in CO-OWNERSHIPAGENTEvery partner is an agent of other partner in the PARTNERSHIPwhere as co-owner is not the agent of other co-owner in CO-OWNERSHIP.LIMIT OF MEMBERSThere is restriction for the maximum number of partners in PARTNERSHIPThere is no restriction for the maximum number of owners in CO-OWNERSHIP.

BASIS OF DIFFERENCEPARTNERSHIPCO-OWNERSHIPTRANSFER OF RIGHTSA partner cannot transfer his rights to another person without consulting the other partner. where as a co-owner can transfer his rights to anyone without consultation.LEGAL CLAIMA partner has a legal claim on the property of partnership.where as a co-owner has a legal claim on the joint property.DIVISION OF PROPERTYA partner has no right to demand the partition of property he can only demand the share of profit.where as a co-owner can demand the division of property.DISSOLUTION RISKPARTNERSHIP is affected by the death, insolvency or retirement of any partner.where as CO-OWNERSHIP cannot be dissolved due to these reasons.MINOR CASEminor cannot become a regular PARTNER. where as a minor can become a regular CO-OWNER.DIFFERENCE BETWEEN PARTNERSHIP AND HUFBASIS OF DIFFERENCEPARTNERSHIPHUF(HINDU UNDIVIDED FAMILY)Interest

interest of a partner in the business is determined by a contractthe interest in HUF business is decided by the status.Death

The death of a partner results in dissolution of a partnershipThe death of a member of an HUF does not disturb the running of a business at all. On his death, his interest is automatically inherited by other surviving members.Insolvency

In case of insolvency of a partner, he ceases to be a member of the firmthe insolvency of a member of a Hindu Undivided Family does not disentitle him of his membership of the HUF.Share

In a partnership, every members is entitled to a stipulated share in profits, to work diligently and to have access to all documents.but the members of an HUF cannot claim these rights and privileges unless partition is effected.BASIS OF DIFFERENCEPARTNERSHIPHUF(HINDU UNDIVIDED FAMILY)New member

A new partner can be admitted to a partnership when other partners agree.there is no such condition in the HUF. Every child by birth acquires an interest in the family business. Membership is automatic and is acquired by virtue of birth in the family.Number of partners

As regards the number of partners in a firm, the membership is restricted to a maximum of 20.there is no such limit in respect of number of persons constituting an HUF.Liability of a partner

The liability of a partner is unlimited and he is personally liable to the outside world for all practical purposes so far as the firm's liabilities are concerned.but the responsibility of any member of the IIUF is limited to the extent of his share in the HUF.DIFFERENCE BETWEEN PARTNERSHIP AND COMPANYBASIS OF DIFFERENCECOMPANYPARTNERSHIPRegistrationA company comes into existence only after its registration under the Companies Act, 1956.In case of partnership, the registration is not compulsory.Legal StatusA company is a legal person and regarded by law as a single person.A partnership is a collection of individual.Minimum number of personsThe minimum number of persons required to form a company is two in case of private companies and seven in the case of public companies.The minimum number of persons required to form a partnership is two.BASIS OF DIFFERENCECOMPANYPARTNERSHIPTransferabilityA shareholder can transfer his share without the consent of other shareholders.partnership, a partner cannot transfer his share without the consent of other partners.Liability of membersThe liability of the members of a company is limitedliability of partners for debts of a firm is unlimited.Contractual capacityThe shareholders of a company can enter into contract with the company and can be employees of the company.Partners can contract with other partners but not with firm as a whole.Length of existenceBut company having legal existence can continue inspite of death and insolvency of the members. It has a perpetual existence.The death or retirement of a partner dissolves the partnership.

Conclusion

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