A relation of Partnership arises from contract and not from status. It is a business organization in which two or more individuals operate a business in accordance with the terms and objectives set out in the Agreement/deed commonly known as Partnership Deed. This structure is said to be the base for the introduction of the Limited Liability Partnership (LLP). The low costs, ease of setting up and minimal compliance requirements make it a sensible option for some, such as home businesses that are unlikely to take on any debt. Partnership Firm Registration is optional for General Partnerships. The partnership is governed by Partnership Act 1932.
A partnership firm is a legal relationship formed by the agreement between two or more individuals to carry business as co-owners. A partnership firm is a business with many owners or more than one owners and each one have invested in the business. Some partnerships include individuals who work in the business, while other may include partners who have limited participation and also a limited liability.
They function a business in accordance with the terms, conditions and objectives set out in a Partnership Deed that may or may not be registered. In Partnership firm, the members are individually partners and share the liabilities as well as profits of the firm in a predetermined ratio.
You need to keep in mind that which type of partnership you want to start before you actually want to start with it. You may have heard the terms
There may also be limited partners. It may be further divided into :
a. Partnership at will
b. Particular Partnership
A partnership firm is best for those who want to set up small businesses and plan to remain small. As it involves Low costs, ease of setting up and minimal compliance requirements thus to opt for such business is the correct decision.
To define: "Partnership" is the relation between persons who have agreed to share the profits and losses of a business carried on by all or any of them acting for all.
In such a partnership firm all the persons who have entered into are individually are called partners and collectively known as Firm. But a Partnership firm does not have a separate legal personality.
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Note: The partners in the Partnership firm can divide profits and losses equally or unequally.
The partner acts as the agent of the firm for the purpose of business; subject to the provisions of the Act.
Registration of Partnership is not necessary. If any partner wants to sue another partner for the Acts done by him in near future then it has to be registered. Moreover, for the partnership to bring any suit to court, the firm should be registered. Thus it is always advisable for such crucial reason to register the Partnership.
It is considered most important document of the partnership, which comprises the terms and conditions relating to the partnership and the guidelines governing its internal management and organization
The deed can be in oral or written form. It is usually a written agreement between the partners of the firm that is used to address the eventuality that the partner will need to be bought out. I tell you the nature of Business. In includes in it, the Profit/Loss sharing ratio among the partners; Rights Duties and obligations of all the partners; duration of the partnership; the rate of interest charged on share capital; Maximum Amount for drawing on each Partner and Interest charged open it etc.