Law of Partnership, 1932

English Partnership Act, 1890 defined the term Partnership as the relation which subsists between the person carrying on a business in common with a view to make profits. Indian Partnership Act, 1932 defined Partnership as the relation b/w the persons who have agreed to share the profits of the business carried on by all or any one of them acting for all.

Essential Elements
Association of two or more persons. Agreement entered by all persons concerned. Organised to carry on some business. Persons concerend must agree to share the profits of the business. Business is to be carried on by all or any of them acting for all.

Classification of Partnership
Based on duration
Partnership at will Partnership for a fixed period

Based on extent of business

Particular partnership General partnership Limited partnership

Classification of partners

Actual/Working/Ostensible partner Dormant/sleeping/silent partner Nominal partner Sub-partner Partner in profits only Minor partner Partner by estoppel Quasi partner Limited and Unlimited partner

Partnership deed

It is a written agreement for partnership containing, Name and address of firm Name and address of partners Nature of business Date of commencement of partnership Duration of partnership Amount of capital contributed by each partner Profit sharing ratio Method of appointing new partner and retirement of existing partners

Rights of a partner

To take part in business To be consulted To use the partnership property To access the accounts To share the profits To act as agent of the form To retire Not to be expelled

Duties of a partner
To carry on business to greatest common advantage. To share the losses To act within authority To observe faith To indemnify for fraud To account for personal profits.

Reconstitution of Firm

Introducing new partner. Retirement of a partner. Expulsion of a partner. Insolvency of a partner. Death of a partner.

Differences b/w dissolution of partnership and dissolution of firm

Dissolution of firm involves dissolution of partnership, whereas dissolution of partnership doesnt necessarily involve dissolution of firm. Termination of relation. Continuity of business.

Modes of Dissolution of Firm

Dissolution by Agreement. Dissolution of partnership at will by notice. Dissolution by operation of law (or) Compulsory
dissolution. If all partners or all partners except for one become
insolvent. If business becomes unlawful.

Dissolution on happening of certain contingencies.

By expiry of time period. By completion of particular project. By insolvency of a partner when there are only 2
partners.

Registration of Firm
Partnership is the result of an agreement b/w 2 or more partners. Registration does not create partnership. It only provides proof of the existence of the partnership firm. Registration of the partnership is not compulsory. It is optional and there is no penalty for non-registration.

Effects of Non-Registration
No suits by partners. No suit by firm. No right to set off.

Differences b/w Partnership and HUF

Partnership Hindu Undivided Family

It is a result of an agreement. No one can become partner

by birth. Female can be a partner.

It is a result of status. One can become member

by birth. Female cant be a member of a HUF by birth. Death of member will not affect the business. Liability of Karta is unlimited whereas other members are liable to the extent of their share. There is no max limit of members.

In case of death, partnership

will be dissolved. Liability of partners is unlimited.

Max number of partners is 10

Partnership

Hindu Undivided Family

All partners can take active part in the business. A partner can demand account of the firm from other partners. Rights and liabilities are governed by Partnership Act.

Except Karta, no member can act on behalf of others. Member cant demand accounts of old dealings. Rights and liabilities are governed by Hindu Law.