Top Important Features That Partners Of Partnership Firm Should Know


The proprietorship form of ownership suffers from certain limitations such as limited resources, limited skill and unlimited liability. Expansion in business requires more capital and managerial skills and also involves more risk. A proprietor finds him unable to fulfill these requirements. This call for more persons come together, with different edges and start business. For example, a person who lacks managerial skills but may have capital. Another person who is a good manager but may not have capital. When these persons come together, pool their capital and skills and organize a business, it is called partnership. Partnership grows essentially because of the limitations or disadvantages of proprietorship.


 

The essential features and characteristics of a partnership are:

 

Agreement

The partnership arises out of an agreement between two or more persons.

 

More Persons

As against proprietorship, there should be at least two persons subject to a maximum of ten persons for banking business and twenty for non-banking business to form a partnership firm.

 

Profit sharing

There should be an agreement among the partners to share the profits of the business.

 

Existence of Lawful Business

As against proprietorship, there should be at least two persons subject to a maximum of ten persons for banking business and twenty for non-banking business to form a partnership firm.

 

Unlimited liability

The liability of every partner is unlimited, joint and several.

 

Principal-Agent Relationship

The partnership firm may be carried on by all partners or any of them acting for all. While dealing with firm’s transactions, each partner is entitled to represent the firm and other partners. In this way, a partner is an agent of the firm and of the other partners.

 

Collective management

The firm and the partners are one. When a contract is made in the name of the firm all the partners are responsible for it individually and collectively.

 

Utmost Good Faith and Honesty

A partnership business solely rests on utmost good faith and trust among the partners.

 

Contractual Relationship

Partnership is formed by an agreement-oral or written-among the partners..

 

Mutual Trust

It means the trust and confidence of partners in each other. Each partner has to work in the best interest of his firm. He must get full confidence & good faith of his partners. He should not make any secret profit & must disclose all the information which is directly or indirectly related to the business.

 

Team Spirit

Team spirit means co-operation & co-ordination with each other. There must be co-operation & co-ordination among all the partners. Each partner is the trustee of other partner. He must give true account of all his dealings in the partnership.

 

Legislation

In India partnership business is governed as per the provision of Indian Partnership Act, 1932.

 

Common (Joint) Management

All partners of partnership can take active part in the management. It means partnership has common management. But practically it is not possible & convenient. Therefore it is managed by one or two partners on behalf of all other partners.


BDS Legal Services is vouched by Entrepreneurs as the most reliable Legal services. We would be super excited to help you. Let’s Connect!

 

About BDS Legal Services :

BDS Legal Services is a leading national law firm in India comprising over numerous professionals, with offices in Mumbai (Headquarter) and Pune. BDS Legal Services was set up in 2012 and has since established an excellent reputation for its integrity and value based proactive, pragmatic and innovative legal advice and its ability to help clients effectively traverse the complicated legal and regulatory regime in India. The mission of the Firm is to provide outstanding legal solutions in the chosen practice areas with a strong emphasis on ethics. Clients benefit from the expertise and experience as a large firm while still enjoying the privilege of personal attention and responsiveness of a small firm. Our Practice areas are – IPR, Secretarial, Legal, Company Registration, Annual Filings, Returns and Tax

 

Get in touch for free consultation on info@bdslegalserv.com or call 022 50677213 / 022 50677219 / 022 50677212.

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