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Partnership Introduction

This document provides an overview of partnership laws in India according to the Indian Partnership Act of 1932. It defines a partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them. The essential elements of a partnership are the existence of a contract, association of two or more persons, carrying on of a business, sharing of profits, and mutual agency. It distinguishes partnerships from co-ownership arrangements and companies.

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75 views12 pages

Partnership Introduction

This document provides an overview of partnership laws in India according to the Indian Partnership Act of 1932. It defines a partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them. The essential elements of a partnership are the existence of a contract, association of two or more persons, carrying on of a business, sharing of profits, and mutual agency. It distinguishes partnerships from co-ownership arrangements and companies.

Uploaded by

Romesh Somani
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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BUSINESS LAW

COURSE CODE: 11004900

DIVYA UTKARSH, Assistant Professor, School of Law


Unit 4: Partnership Laws
INDIAN PARTNERSHIP ACT 1932
 Came to force on Oct 1st 1932

 The partnership comes into existence by a contract.

 The provisions of Indian Contract Act apply to the


partnership firms (except when they are inconsistent
with the express provisions of the Partnership Act).
Partnership: Definition
According to s.4 of Indian Partnership Act,
“Partnership is the relation between the persons who
have agreed to share the profits of a business carried
on by all or any of them acting for all.”

“Persons who have entered into partnership with one


another are called individually partners and
collectively a firm and the name under which they
carry on the business is called the firm name.”
ESSENTIALS OF A PARTNERSHIP
 Existence of a contract.

 Association of 2 or more persons.

 Carrying on of business.

 Sharing of profits.

 Mutual agency.
Partnership: Essentials
EXISTENCE OF A CONTRACT
 Partnership arises from a contract, rather than due to status,
operation of law or inheritance.
 s.5 states that – “the relation of partnership arises from contract
and not from status.”
 Contract – expressed or implied.

ASSOCIATION OF 2 OR MORE PERSONS


 Since partnership is the outcome of a contract, atleast 2 persons
are required.
 Partnership Act is silent about the maximum limit of partners, but
under the Companies Act, it is expressed that a partnership
consisting of more than 10 persons for banking business and 20
persons for any other business will be illegal.
CARRYING ON OF BUSINESS
 Parties must have agreed to carry on a business.

 Business means – every trade, occupation, profession.

 Carrying on a charitable work, sharing of any income from a


property, dividing goods among themselves etc. can’t be a
partnership – not a business.

SHARING OF PROFITS
 The object of a partnership – sharing of profits.

 Aim of partnership – generation of profits.

 No partnership – philanthropic/charitable motive.

 Profit may be shared in any ratio, but there must be a profit motive.
MUTUAL AGENCY
 Business carried on by all the partners or any of them acting for all
– mutual agency.
 Every partner is an agent and principle for himself and other
partners – he can bind the other partners by his acts – he can be
bound by the acts of other partners.
 It must be tested whether mutual agency exists or not.

All the above features must co-exist to constitute partnership.


Firm Name
The partners can choose any name for the firm,
subject to the following rules:
1. Name – not identical/similar to other firm’s name.
2. Name – must not contain words like Crown,
Emperor, Empress, Empire, Imperial, King, Queen,
Royal.
3. Name – must not contain words expressing or
implying the sanction, approval or patronage of
the Govt., except when it is consented.
Partnership and Co-ownership:
Distinction
Partnership Co-ownership
1 Result of agreement Not necessarily a result of agreement
2 Involves sharing of profits/losses Not necessarily involves sharing of
profits/losses.
3 Partner can’t transfer his interest to a Co-owner can transfer his interest to a
stranger without consent of others. stranger without consent of others.
4 Partners are the agents of each Co-owners are not the agents of each
other (real/implied) other
5 Maximum limit of partners is fixed No maximum limit of co-owners
6 Partnership involves carrying on of a Not necessarily involve carrying on of
business business
7 Partners can sue his co-partners for Co-owner is entitled to demand partition
dissolution of the firm and accounts of joint property in specie (actual form)
Partnership and Company: Distinction

Partnership Company
1 Partnership firm is governed by the A company is regulated by Companies
Indian Partnership Act and Indian Act
Contract Act
2 For a partnership firm registration is Registration of Company is compulsory
not compulsory under Companies Act.
3 In partnership the partners should not In public company, minimum members is
exceed twenty and in case of banking seven and there is no maximum limit. In
business, they should not exceed ten. private company, minimum members is
two and maximum is fifty.
4 Partner is an agent as well as principle A member is not an agent of company or
of firm and other partners. of other members.
5 Partner can bind the firm by his act. Member cannot bind company by his
act.
Partnership Company
6 Partners can take part Ordinary members cannot take part in
in management of a firm. management of a company. Only
director members can take part in
management.

7 A partnership may be dissolved by A single member cannot wind up a


any partner at any time. company.
8 Partner can’t transfer his interest in A shareholder can transfer his share
the firm without the consent of other freely without restriction.
partners.

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