Partnership Firm
The Indian Partnership Act, 1932 is the legislation that governs Partnership Firms in India. A partnership is an understanding between persons who have agreed to carry on a lawful business together and share the profits of that business. The term “Partnership Firm” is a collective phrase to refer to all partners as one.
Essentials of a Partnership
- A minimum of two and not more than 20 legal entities;
- Though not spelt out in the Act, for all practical purposes, the agreement or deed should be in writing;
- All partners should be competent to contract. A minor can be admitted to a partnership but only to share in the profits.
- Every partner is competent to represent himself and every other partner by his acts and deeds in the ordinary business of the firm;
- The partnership deed should set out the ratio for sharing of profits and losses of the business;
- The liability of partners is unlimited. Their personal assets can be proceeded against for payment of dues of the Partnership Firm;
- Registration of a partnership is voluntary. But, whereas third parties can sue an unregistered firm and its partners, an unregistered firm cannot approach the Courts of Law for any relief or settlement of any dispute.
Getting paperwork done is one of the most annoying things in the world. But a partnership protects you when you are partnering with someone in business - even if they are a relative or friend.
Best to just get these things ticked off and done or you may encounter some arguments over profits and/or business liability between partners in the future.
Partnership firm is a voluntary association formed when two or more people join hands to carry on a business and agrees to share profit or loss. It is regulated by the guidelines of Indian Partnership Act, 1932. As per the act, there may be 2 or more partners, but not more than 20, registration of a firm is not mandatory, the agreement between the partners must be in writing, the ratio of sharing profit and loss is mentioned in the agreement and the liabilities of all partners are unlimited.
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