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Two or more persons join hands to form a
business organisation with the objective of earning profit, The persons who join
hands are individually known as ‘Partner’
a. A partnership firm is suitable in case of business where the capital requirement is medium i.e. it is neither too large nor too small. Business like retail and wholesale trade or small manufacturing units can be successfully started by partners.
b. You learnt that in a partnership firm persons having different ability, managerial talent, skill and expertise join together. So it is most suitable for construction business, legal firms etc. where each partner contributes the best as per his specialization.
It is basically a relation between two or more persons who join hands to form a
business organisation with the objective of earning profit. The persons who join
hands are individually known as ‘Partner’ and collectively a ‘Firm’
A partnership is when 2 or more people operate a business as co-owners and share income. All co-owners (i.e. partners) act on behalf of each other in the business. Like the sole trader structure, a partnership entity is not separate from its operators.
General Partnership
An association of two or more persons that carry on as the co-owners of a business in order to generate a profit. The default rule is equality between all members and the only way to change this is through a formal writing. Each partner possesses an equal voice in management and the authority to act as agent for the partnership. Each partner can be held liable for all debts of the partnership, and for torts committed by other partners within the course of the partnership’s business.
Particular Partnership
If the partnership is formed for a particular object of temporary nature, it is called particular partnership. On completion of a particular venture, it comes to an end. Under this no regular business is done. For example, partnership for the construction of a building and partnership for producing a film
Partnership at Will
A Partnership at Will is a form of business partnership where there is no fixed term agreed for the duration of the partnership. In other words, it is completely open ended. This differs from a usual business partnership by way of agreement as this type comes to an end at any time when a partner serves a notice to dissolve the partnership on the other partner or partners providing the partnership agreement provides for this.
Limited Partnership
A partnership formed by two or more person having one or more general partners and one or more limited partners. A limited partner has no voice in the active management of the Limited Partnership, which is conducted by the general partner(s). Every limited partner’s liability is limited to the capital he has contributed to the partnership.
Limited Liability Partnership
Each partner has equal management rights and is an agent for the business. Only the LLP is liable for business obligations. All partners are liable for their own tortuous conduct and for those they supervise
Minor Partner:
Partnership arises from contract and a minor is not competent to enter into contract. Therefore, strictly speaking, a minor cannot be a full-fledged partners. But with the consent of all the partners he can be admitted into partnership for benefits only. He is not personally liable to third parties for the debts of the firm, on attaining majority, if he continues as a partner, his liability will become unlimited with effect from the date of hi original admission into the firm.
Active Partner
Partner who takes an active part in the management of the business is called active partner. He may also be called 'actual' or 'ostensible' partner. He is an agent of the other partners in the ordinary course of business of the firm and considered a full fledged partner in the real sense of the term.
Partner by Estoppel or Holding out:
When a partner is not a partner but represent to the outside world that he is a partner in a firm, he is stopped or prevented from denying the truth. He is considered as a partner in the eyes of law. Similarly, if a person is declared i be a partner by a partner of a firm and such person remained silent without denying it, he also considered a partner by holding out. Thus, such persons are liable to outsiders i partners on the principle of estoppel or holding out because on faith of their representation action outsiders have granted credit to the firm.
Sleeping or Dormant Partner:
A sleeping or dormant partner is one who does not take any active part in the management of the business. He contributes capital and shares the profits which is usually less than that of the active partners. He is liable for all the de of the firm but his relationship with the firm is not disclosed to the general public.
Partner in Profits:
A partner who shares in the profits only without being liable of the losses is known as partner in profits. He does not take part in the management of the business but he is liable to third parties for all the debts of the firm.
Sub-partner:
When a stranger shares the profits derived from the firm by a partner he is regarded as a sub-partner. A sub-partner is in no way connected with the firm or he not a partner of the firm. He is simply a partners' partner. Therefore, he has no rights again the firm nor he is liable for the debts of the firm. He only shares profits from a partner.
Nominal Partner:
A partner who simply lends his name to the firm is called nominal partner. He neither contributes any capital nor shares in the profits or take part the management of the business. But he is liable to third parties like other partners. A nominal partner must be distinguished from the sleeping partner. While the nominal partner is known to the outsiders and does not share in the profits, the sleeping partner shares in the profit a his relationship is kept secret.