This document defines partnership and outlines key concepts in Indian partnership law.
[1] A 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. The partners are individually called partners and collectively called a firm.
[2] Some key characteristics of a partnership include an association of two or more persons, an agreement to carry on business together, sharing of profits, and mutual agency between the partners.
[3] On dissolution, the partners have rights related to winding up the business and settling accounts, and liabilities regarding unfinished transactions and notice of dissolution.
2. DEFINITION OF
PARTNERSHIP
Partnership is the relation between
persons who have agreed to share the
profits of the business carried on by all or
anyone of them acting for all.
Persons who have entered into
partnership with one another are
individually called partnership and
collectively are called firms
The name under which the business is
carried on is called the firm name.
3. Characterstics
Association with 2 or more persons
Agreement
Business
Sharing of Profits
Mutual Agency
4. Law of partnership-extension of
law of agency
The partnership business may be
carried on by all or anyone of them
acting for all. Thus the relationship of
principal and agent is established
amongst partners and this relationship
is governed by the law of agency.
5. A partner assumes 2 fold
character:
1. He is an agent of the firm so far his
dealings with the outside world for the
purpose of the business of the firm
are concerned.
2. He acts as a principal amongst other
partners.
6. Formation of Partnership
Partnership based on agreement
Partnership agreement can be made
orally or in written
Essential elements of valid contract has
to be present
Object of the partnership should be legal
Minor may be admitted to the benefits of
partnership with the consent of all the
partners
No consideration required for forming
agency; likewise for partnership also
7. Partnership deed
The document containing the agreement
between the partners are called
Partnership Deed.
Contents of Partnership Deed:
1. Nature of the business
2. Place of the business
3. Name and address of the partners
4. Profit sharing ratio
5. Interest on capital etc….
8. Who may not be partners
Only competent persons can enter into
partnership agreement
1. Alien enemy
2. Minor
3. Person of Unsound Mind
4. Corporation
9. Test for partnership
Agreement between the parties
Real relationship between the parties
Sharing of profits
Mutual agency
10. Cases where no partnership
relation exists
Joint Owners
Sharing of Profits
Membes of Joint Hindu Family
11. Partnership and other
associations
Partnership and Joint Hindu Family
1. Mode of Creation
2. Interest in Business
3. Admission of New
Members(female, Minor, Fluctuating)
4. Authority of Members
5. Liability of Members
6. Right of Members to demand
accounts
7. Registration
12. Partnership and co-ownership
Mode of Creation
Business
Nature of Interest
Transfer of Interest
Number of Members
Authority of Members
Partition of Property
Lien for Expenses
14. Registration of Firm
Procedure for registration:
To be registered with Registrar of Firms
Contents for application of registration
Time of Registration
15. EFFECTS OF NON
REGISTRATION
Suits between partner and firm
Suits between firm and third parties
Claim of set off
Alterations
Penalty for false particulars
Inspection for Registrar of Firms and
documents and grant of copies
Rules of Evidence
16. Relation of partners to one
another
Rights of a partner
Right to take part in business
Right to be consulted
Right to access accounts
Right to Share Profits
Right to interest on capital
Right to interest on advances
Right to prevent entry of new partner
No liability before joining
Right to be as agent
Right to retire
Right to outgoing partner to share in the
subsequent profits if his share is not settled by
other partners.
17. Duties of a partner
To carry on business to the greatest common
knowledge
To observe faith
To indemnify for fraud/ willful neglect
To attend diligently
Not to claim remuneration
To share losses
To hold and use the property of the firm exclusively for
the firm
To account for personal profits
To account for profits in competing business
To act within authority
Not to assign his rights
To be liable jointly and severally
18. Property of the firm
All property originally brought into the
common stock
Interest received out of the
investments
All properties acquired during the
course of the business
Goodwill(reputation, industrial
contacts, brand image etc… which the
firm has developed over the years)
19. Agreements in restraint of
trade
Exceptions:
1.A partner shall not carry on another business
while he is a partner
2.An outgoing partner may agree with his
partners not to carry on a similar business
within a specific period
3.upon dissolution, some or all of them will not
carry on similar business
4. after dissolution and sale of
goodwill, partners not to trade with the same
brand name
20. Relation of partners to third
parties
Implied authority of a partners:
Purchasing goods on behalf of the firm
Selling the goods for the firm
Receiving payments
Settling accounts
Borrowing money/ credit facilities on
behalf of the firm
Pledging on behalf of the firm
Engaging servants/employees for
carrying the activities of the firm
21. Partners authority incase of
emergency
Partner has authority incase of
emergency if
They are done to protect the interest
of the firm and to prevent loss
Partner should act to situations
assuming if it was for his own case
22. Reconstitution of firm
Introduction of a partner
Retirement of a partner
Expulsion of a partner
Insolvency of a partner
Transfer of a partner’s share
Death of a partner
23. Types of partners
Actual/ ostensible Partner
Sleeping/dormant partner
Nominal Partner
Partner in profits only
Sub-Partner
Partner by Estoppel/ Holding out
Minor as a Partner
24. Dissolution of a firm
It means complete break down or
extinction of the relationship between
all the partners of a firm
25. Dissolution of the firm
Without the order of With the order of the
the court court
1. By Agreement
2. By Compulsory
Dissolution
3. On the happening
of certain
contingencies
4. By Notice
26. By Agreement
With the consent of all the parties
In accordance with the contact between
them
Compulsory dissolution
1. When one or all partners become
insolvent
2. By the happening of any event which
makes it unlawful for the business firm
27. Dissolution on the happening of
certain contingencies
Expiry of the term
Completion of a particular adventure
Death of a partner
Insolvency of partner/partners
28. Dissolution by notice
Firm may be dissolved by any partner
who gives notice that the partnership
will no longer exists.
In such case, dissolution is counted
from the day when the notice is issued
by the partners
29. Dissolution by court
Insolvent
Incapacity
Misconduct
Persistent Breach
Business working at loss
Gambling of a partner in stock
exchange
Fraudulent Breach
Persistent refusal or neglect by a
partner to attend the business
30. Rights of partners on
dissolution
Have the right to wound up
Right to have the debts of the firm
settled out of the property of the firm
Share the profits of the firm earned
after dissolution
Have the premium returned or
premature dissolution
Restrain the use of firm name or
property by any partner for his own
benefit
31. Liabilities of a partner on
dissolution
If public notice is not given, partners
continue to be liable for any act done
by any partner after dissolution
To wind up the affairs of the firm in
smooth manner
To complete the transactions begun
but unfinished at the time of
dissolution
32. Settlement of accounts
Sale of Goodwill
Sharing of deficiency( first out of
profits, then out of capital and last out
of partners individual proportions in
which they are eligible to share profits)
Application of assets- first to pay the
debts outside and then to share
amongst the partners in their profit
sharing ratio
33. Public Notice
To be given when
Retirement
Dissolution of a registered firm
Addition of new partner
By how:
1. By notice to the Registrar of Firms
2. By publications in the Official Gazette
3. By publication in Newspapers