What is Partnership?
Partnership means the joint conduct and control of business by two or more persons who contribute capital and share profit.
“Partnership is the relation between persons who have agreed to share profit of a business carried out by all or any of them, acting for all.”
Thus, partnership is a group of two or more persons who contribute capital and share profit/losses as well as management and control while carrying on any business.
How to start a Partnership Firm?
According to Indian Partnership Act 1932 To start a partnership firm, partners need to enter into an agreement,which is popularly known as Partnership Deed.A different state imposed different stamp duty on the agreement or deed. Partner need to notarized the agreement with the stamp paper.
Eligibility Criteria to Formation of Partnership Firm
Two or More Person
There must be at least two persons who associate with each other to carry on some predefined business activity. When the number of partner in partnership get reduced to one whether by death or insolvency it would cease to be a partnership. In partnership, the only a person can be partners and not a firm or an institution. The maximum permissible number of partners is 20 in the case of ordinary business and 10 in the banking business.
There must be an agreement or contract between persons to form a partnership. The agreement must be written on verbal. Thus, the relation of partnership arises from a contract and not from status or Birth. The person not having a contractual capacity cannot be a member of the partnership Firm.
There should be Lawful Business
The agreement to form a partnership should carry on any lawful business.where there is no lawful business,there is no partnership.
The partnership is formed by entering into an agreement by one or more persons. This agreement acknowledges the common intention to form a partnership. This agreement is called a Partnership Deed and contains all important terms and conditions related to the partnership.
No Minimum Capital
There are no minimum capital contributions is prescribed, it is based on the business requirement. And the stamp duty of agreement is based on the capital contribution of the firm.
The name of the firm should be unique, and it must not be the same or similar to the name of any existing firm trademark which is registered or applied.
Type of Partnership
Various type of partnership are as under :
1. Partnership at will: if the duration of the partnership has not been defined in the contract, and any person can opt the out when he/she so desires, it deemed to be a partnership at will.such partnership can be dissolved at any time by giving a notice of dissolution to other partners.
2. Particular Partnership: When the partnership is formed for a particular venture or fixed period, it is called a particular partnership. Such a partnership is automatically dissolved after the completion of a particular venture or expiry of a fixed period.
3. General Partnership: In this type of partnership the liability of all the partners is unlimited. Unlimited liability means that the private properties of partners are also liable to pay the debts of the business if the firm property is insufficient.
4. Limited Partnership: Where the liability of some partners is limited to their investment in the business, such partnership is entered into by such persons who are not interested in actively participating in running the business and do not want to assume any liability besides what they have invested in the business. The personal property of a limited partner is not liable for firms debts.
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Difference Between Partnership Firm and LLP
|Key Elements||Partnership Firm||LLP’s|
|Applicable Law||Indian Partnership Act 1932||The Limited Liability Partnership Act 2008|
|Registration||Optional||Compulsory with ROC|
|Creation||Created by Agreement||Created by Law|
|Separate Legal Entity||No||Yes|
|Number of Partner||Minimum 2 and Max 50||Minimum 2 and Max Unlimited|
|Perpetual Succession||It does not have perpetual succession||yes it has perpetual succession|