Partnership

OUTLINE Meaning &Definition of Partnership

Essential elements of Partnership

Characteristics of partnership

Rights of Partners
Tips for Effective Business Partnership

Meaning &Definition of Partnership

Section 4 of the Partnership Act, 1932 defines the term Partnership as under:
PARTNERSHIP IS THE RELATION BETWEEN TWO OR MORE PERSONS WHO HAVE AGREED TO SHARE THE PROFITS OF A BUSINESS CARRIED ON BY ALL OR ANY OF THEM ACTING FOR ALL. Thus, Partnership is the name of legal relationship between/among persons who have entered in to the contract.

Essential elements of Partnership

Two or more persons

Sharing of profit

Mutual agency

An agreement

Business

For forming a partnership the above elements should be present. Though each element is important, Mutual Agency is the conclusive proof

Characteristics of partnership
1. 2. 3. 4. 5. 6. 7. 8. Voluntary association Mutual agency Limited life Unlimited liability Co-ownership of property Taxation Partnership agreement Restriction on transfer of interest. 9. Management.

Voluntary Association
Agreements to form a partnership are voluntary They can be dissolved at will (existing liabilities will remain however) They can be formed by an oral agreement (handshake) or a written agreement

Limited Life (generally)

Partnerships terminate with the death or bankruptcy of any partner Partnerships terminate with: The withdrawal of an existing partner or The admission of a new partner

Mutual Agency
As an agent, each and every partner can bind the partnership within the scope of the partnership business Partners, by agreement, can limit the scope of partners acting for the partnership

Outsiders, unless they have knowledge of a partners limitation to bind the partnership, can legally

Relationship of partners with third parties

Mutual agency refers to the relationship of principal and agent Among partners
Example in case of firm of A,B and C

When A acts A- Agent B and C- Principal

When B acts B- Agent A and C- Principal

When C acts C- Agent A and B- Principal

Co-ownership of property
Partnership property is jointly owned by the partners regardless of which partner invests the property

Restriction on transfer of interest.

No partner can transfer his share to any other person without to consent of all other partner.

Management.
In a partnership business, every partner has a right to take in his management.

Partnership Businesses
Medical Stores Health Clinic Net Caf Hotels Restaurants Boutiques

Tips for Effective Business Partnership

Identify and utilize the strengths of each partner

Rahat and Raheem 's were in restaurant Business. Rahat realized that one of his personal strengths was his artistic ability and interest. When he decided to connect his art with the business, the average sales were up 35% the first month and another 25% the following month. He used his restaurant as a gallery for himself and guest artists.

Make sure each partner's needs and expectations are addressed

Ali and Rosa had a wholesale distributorship that was limping along. Then Ali became ill and couldn't work for several months. In the interim Rosa had to carry the entire business alone. While she was able to do so, when Ali came back he didn't have the energy or motivation to pick up his role again. Rosa wasn't prepared to carry it alone long term. Until they sat down together to discuss expectations, each was feeling let down and soon the bad feelings took over.

Define job roles for each partner, including accountability

Shumela knew she was the primary sales person for their insurance business. But she expected her partner, Charles, to bring in some of the business, even though that had not been discussed in depth or clarified in writing. When she saw he was handling personal business during regular business hours she became furious. His mental picture of his role was obviously quite different from Shumela's. Discussion and clarification of each job role was definitely in order.

THANkS