There are many forms of businesses are available in today’s time. We all understood that a proprietorship form of business is faced with many limitations and sole proprietorship is usually small. With the expansion of business, it became necessary for a group of person to join hands together and provide necessary capital and skill. Partnership form of business removes all the limitations and allows the business to grow. Tax and Services provides you the best services and content related to all types of business forms.
Meaning of Partnership
Partnership is an agreement or a relation between two or more persons who has agreed to share profits of a business carried on by all or any of them acting for all. Each Member of the Partnership business are individually called ‘Partners’ and collectively called a ‘Firm’. All Partnership Firms are governed by Partnership Act, 1932 in India
Partnership happens from the desires of business to take advantages of complementary ability and to raise more capital or fund. A Partnership firm has not a separate legal entity distinct from its partners. All the Partners of a partnership firm share the profits and losses in proportion of their respective ownership.
Essential Elements of a Partnership Firm
Some essential elements of a Partnership firm are given below without them a Partnership cannot exist:-
§ Contract for Partnership
§ Maximum No. of Partners in a Partnership is 20
§ Carrying on of Business in a Partnership
§ Sharing of Profits
§ Mutual Agency in a Partnership
Kinds of Partners in a Partnership Firm
There are many types of partners in a Partnership Firm which are as explained below:-
Active or working Partner– Active Partner is a partner who contributes capital to the firm and also takes active part in the day to day operations of the business.
Sleeping or Dormant Partner– Dormant partner is a type of partner who does not take part in the activities of the business. He contributes the capital to business and shares the profits earned by the firm.
Nominal Partner-a person who lends his name and reputation to the partnership is called nominal partner. He does not contribute capital to the firm and not take part in activities of firm.
Partners in Profits only– Partners in Profits only means the person who becomes a partner on the specific understanding that he shall get share in the profit but not share the loss of the firm.
Partner by holding Out-Partner by holding Out means if a person is projected as a partner of the partnership firm and the person does not deny it then he becomes a partner by holding out. It is also not a partner of the firm.
Quasi Partner-a person who is no longer a partner of the firm but creates an impression that he continues to be partner of the firm is called a quasi partner.
Limited Partner– Limited Partner is a partner of the firm whose liability is limited to his contributes to capital. Private Assets are protected of Limited Partner.
Secret Partner-A Partner of the firm who does not wish to be known as partner t to outsiders is called a Secret Partner. He is entitled to all the rights of the Partner and is Liable for all the claims on the firm.
Minor as a Partner– A Minor Partner is a person who is below 18 years old which he is subject not to be a partner in a firm but with the consent of all the partners for the time being, he can be admitted to the benefits of partnership firm.
Types of Partnership
At Tax and Services, types of Partnership are as follows:-
General Partnership– In General Partnership there is two or more owners to run a business and each partner represents the firm with equal right. Partners are personally liable for the firm’s Debts and liabilities.
Limited Partnership– In Limited Partnership, at least one partner has unlimited liability and the other partners have limited liability.
Limited Liability Partnership– In Limited Liability Partnership Partners personal assets cannot be used to recover debts. They are not shielded for Personal acts. All the Partners have limited liability.
Partnership at will- Partnership at will means the partnership agreement should not have any fixed expiration date and no particular determination of the partnership should be mentioned.
Advantages of Partnership Firm
Partnership firm is simple and easy form of business. Some advantages of the Partnership are as follows:-
Ø Ease of formation
Ø Flexibility of Operations
Ø Combination of different skills
Ø Greater Financial Resources
Ø Greater Creditworthiness
Ø Greater Managerial Resources
Ø Maintenance of Secrecy
Ø Economies in management
Ø Protection of Minority Interest
Ø Incentive to Hard work
Ø Risk Reduction
Ø Greater scope for expansion
Ø Easy Dissolution
Procedure for Partnership Firm Registration
· Submit an application Form to the Registrar
· File the Partnership Deed to the Registrar
Ø Partnership Deed means a document that defines the rights and obligations of the partners of the firm. Name, Address, Occupation of Partners, duration of Partnership, Nature of Business, Profit sharing Ratio, Right to interest, Salary, Commission etc.
· Pay the Fees
· Approval of the application