Introduction
A
partnership is an agreement where parties, known as partners, agree to
co-operateto advance their mutual interests. The partners in a company maybe
individuals, businesses, interest-based organizations, schools, governments, or
combinations.Organizations may partner to increase the likelihood of each achieving
their mission and to amplifytheir reach. A partnershipmay result in issuing and
holding equity or maybe only governed by a contract.
The
proprietorship form of ownership suffers certain limitations such as limited
resources, limited skills, and unlimited liability. Expansion in business requires more capital
and managerial skills and also involves more risk. A proprietor finds him
unable to fulfill these requirements. This call for more persons come together,
with different edges and start a business- for example, a person who lacks
managerial skills but may have capital. Another person who is a good manager
but may not have capital. When this persons come together, pool their money and
skills, and organize a business, It is called partnership. Partnership grows
mainly because of the limitations or disadvantages of proprietorship.
The Indian
Partnership Act,1932, section 4, define partnership as“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.”
Aims
and objectives:-
The
project aims to learn about the process of registering a partnership firm and
its benefits
Objectives
of the study are
·
To
learn about what is a partnership firm
·
To
learnabout the process of registering a partnership firm
·
To
learn about the different benefits of partnership firm
·
To
determine the pros and cons of partnership firm
Need
and importance:-
Advantages
of partnership firm:-
Ø
Availability
of large resources
Ø
Better
decisions
Ø
Flexibility
in operations
Ø
Sharing
risks
Ø
Protection
of interest of each partner
Ø
Benefit
of specialization
Disadvantages
of
partnership
firm:-
Ø
Instability
Ø
Unlimited
liability
Ø
Lack
of harmony
Ø
Limited
capital
Ø
No
legal status
Ø
Not easy to transfer ownership
Registration
of partnership firm:-
A
partnership firm can beregistered, whether at the time of its formation oreven
subsequently. We need to apply with the Registrar of firms in the area in which
our business is located.
·
Application
video for partnership registration should include the following information-
Name of the firm
Name of the place where the business is carried on
Name of
any other site where by the companyis.
Date of
partners joining the firm
Full name
and permanent address of partners
Duration of the firm
·
Every
partner need to verify and sign the application
·
Ensure
that the following documents and prescribed fees are enclosed with the
registration application
·
Application
for registration in the prescribed form
·
Duly
filled specimen of Affidavit- certified copy of partnership deed
·
Proof
of ownership of the place of business for the rental / lease agreement there
off it may be noted here that the name of our partnership firm should not “contain
any words whichmayexpress or imply the approval of the government except where
thegovernment has given its written consent for the use of such words as part of the firms
name.”what's the registrar of firms is satisfied that the application procedure
has been duly completed with, he shall record an entry of the statement in the
register of
firms and issue a Certificate of registration.
·
Essential elements of a partnership firm:
·
Contract
of partnership:-The
partnership is the result of a deal. It does not rise from status, operation of
law,orinheritance.Thus, at the time of the death of the father, who has a
partner in the partnership firm, the son can claim a share in the partnership property but cannot become a
partner unless he enters into a contract for the same with other concerned.Thus,
“contract” isthe very foundation of
partnership.
·
Sharing
of profit:-This essential element provides that the agreement
to carry on business must be the object of sharing profits amongst all the
partners. Thus, there would be no partnership where the company is carried on with
an altruistic motive and not for making a profit or where only one of the
person is entitled to the whole of the advantages of the business . The
partners may, however ,agree to share the benefits in any ratio they like. Sharing
of losses not necessarily.
·
Mutual
agency in partnership:-These element defines that the business must
be carried on by allthe partners or any
of them acting for all. Thus, every
partner is both an agent and principal for himself and other partner, that is
he can bind by his act the other persons and can be bound by the laws of other
partners. The importance of the element of mutual agency lies in the fact that
it enables every partner to carry on the business on behalf of others.
Types
ofpartnerships:-
·
General partnership:-In a traditional partnership model, all the
partners share in the profitsand risks of the business. Each partner has
unlimited liability responsible for the debt of the company - our assets can be seized if our business owes
money. If our partners do anything wrong with the business, we are also held
responsible.
·
Limited partnership:-Limited partnership
havetwo different types of partners general partners and limited partners.
General partners are
responsible for managing the business. They have unlimited liability.
Limited partners are only liable for what they
have contributed to the business–can only lose the money they have invested.
Limited partners do not manage the business.
·
Limited liability partnership:- A
limited liability partnership protects the partnership from the debts of the
business or the actions of other partners.
Limited liability partnerships
are only available to some professions:
Chartered
Accountants
Certified
management accountants
Certified general
accountants
Medical doctors
Chiropractor
Features of partnership firm :-
·
Agreement :- The organization
arises out of a contract between two or more persons.
·
Profit-sharing:-There should be an
agreement among the partners to share the profits of the business.
·
Legitimate business:- The business to
be carried on by a partnership must always be legal.
·
Membership:-There must be at
least two persons to form a partnership. In case of the banking business, the
maximum is ten members.
·
Unlimited liability:- The liability of every
partner is unlimited , joint, and
several.
·
Principal-agent relationship:-Every
partner is an agent of the firm. He can act on behalf of the firm. He is
responsible for his acts and also for the deeds done on behalf of the other partners.
·
Corporate
management:-The firm and the partners are one. When a contract
is made in the name of the firm, all the partners are responsible for itindividually
orcollectively .
·
Non-transferability of shares:-A partner cannot transfer his
stock of interest to others withoutthe concerned of the other partners.
Conclusion:-
There should be a proper contract between the
partners, which shall state all the terms and conditions of the partnership
firm. The agreement clearlywill show the rights and liabilities of the
partners, capital to be employed by the partners, the interest on money of the
partners, the salary and other remuneration to the partners, admission of new
partners dissolution of partnership firm etc.
Nothing is definite in the Indian Partnership Act
in respect of several partnership firms.Still, as per the company act, there should not be
more than 10 persons in the case of banking business and 20 persons In other
businesses. Otherwise, the partnership shall be termed illegal.
The
partnership firm should beformedfor doing business, and the aim of the firm should be to earn a profit.
The profit should be divided between the partners after
the end of the financial year as per the agreement. The benefit cannot be
carried forward in case of partnership firm.
The business can be carried out by one partner, by
few partner’s or by all.
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