Features of partnership firms
The contract may be oral or written but, in practice, written agreement is made because it helps to settle the disputes if they arise later on.
Risk of Implied Authority: Each partner is an agent for the partnership business. Also, the partnership of a father cannot be inherited by his son. Thus, the law of partnership is a branch of the law of Agency.
Partnership grows essentially because of the limitations or disadvantages of proprietorship. Sharing of Profits: The intention of partners is to earn profit through collective effort.
These conflicts harm the firm as a whole. Likewise, a partner cannot file a suit to enforce his rights against the firm and other partners under the Partnership Deed.
It gets dissolved every time there is a death, insolvency or retirement of a partner.
Project on partnership firm
Relative Lack of regulation Most governmental regulations and reporting requirements are written for corporations. X and Y cannot say that Z did not consult them or that they did not sign the loan document. Further, if a partner is deprived of his right to share the profits of the business, he cannot be called a patner. Registration is not compulsory in most cases. A proprietor finds him unable to fulfill these requirements. Accordingly, the relation of partnership arises from contract and not from the status. Thus, each partner is jointly and severally liable. Sharing of profits: The purpose of partnership should be to earn profits and to share it. Share with friends. Although partners may limit a partner's ability to enter into contracts on the company's behalf, this limit only applies if the third party entering into the contract is aware of the limitation. Thus, in determining whether a group of persons is or is not a firm, whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties as shown by all relevant facts taken together, and not by profit sharing alone. Ease of formation Other than registration of the business, a partnership has few requirements to be formed. Every time a partner withdraws or is added, a new partnership agreement is required if the business will continue to operate as a partnership.
Contractual Relationship: The relationship of partners is bound by the legal agreement or contract entered into by each of them. As most partnerships create unlimited liability for its partners, it is important to know something about potential partners before beginning a partnership.
Further, if a partner is deprived of his right to share the profits of the business, he cannot be called a patner. Every partner is a general agent of the firm as well as of his co-partners.
Thus, all 3 of them share profits, although C does not bring in any capital. All these reasons paved the way to give birth to another form of business organization, i.
Merits of partnership firm
In the following cases, persons do share profits, but are not the partners: a By a lender of money to person engaged or about to engage in any business. Expansion of business: Due to the availability of sufficient finance and skill the business can be expanded very easily. A partnership in which all partners are individually liable is called a general partnership. A joint ownership of some property by itself cannot be called a partnership. Other than this his participation with respect to capital, profits, management and liability will be the same as all the other partners. This is the name with which the partnership will be registered with the Registrar of firms. At times, an incompetent partner may lend the firm into difficulties by taking wrong decisions. Transfer of ownership Although it is relatively easy to dissolve a partnership, the transfer of ownership, whether to a new or existing partner, requires approval of the remaining partners. Registration is not compulsory in most cases. Likewise, a partner cannot file a suit to enforce his rights against the firm and other partners under the Partnership Deed. So a contract must be entered into to form a partnership firm. Accordingly, the relation of partnership arises from contract and not from the status. This can be done voluntarily when all partners agree to so. Limited Life: Partnership is a relationship between partners.
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