PARTNERSHIP

LECTURE # 4
 Outline
 Introduction to Partnership
 Elements of partnership
 Definitions
 Legal Essentials
 Features
 Merits
 Demerits
 Types of partners
 INTRODUCTION
 Partnership is the kind of business
organization in which two or more
persons join their resources and skills
to operate a business and earn profits
from it.
 After the sole proprietorship the next
development in business organization
was the formation of partnerships
ELEMENTS OF PARTNERSHIP

 Association of at least two or more

persons.
 Contractual relationship
 Earning of profit
 Mutual agency
 DEFINITION
 Partnership is form of business ownership
in which the company is operated by the
two or more people who are co owners by
the voluntary legal agreement.

 Partnership is the relation between

persons who have agreed to share the
profits of a business carried on by all or
any one acting for all
(Partnership act 1932)
LEGAL ESSENTIALS

 Agreement (written or oral)

 Agreement to share Profits
 Agency Relationship
 Unlimited Liability
 Maximum Number of Partners
 Minimum 2 members
 Maximum 20 members

 For banking firm 10 members

 FEATURES
1. Formation
2. Minimum and maximum number of partners
3. Equal Contribution or Capital_ not necessary
4. Equal share in profits_ not necessary
5. Registration
6. Transfer of Interest
7. Management
8. Agency Relationship

Contd……..
 Contd……..

2. Duration
3. Implied authority
4. Admission of a new partner
5. Ease of dissolution
MERITS
M ore public confidence
E ase to form and to dissolve
expansion of business
R egistation not compulsory
Reduced audit expense
I mmediate decisions F lexibility
T ransfer of loss
S ecracy G reat Manageability
Starting cost low
L ack of strict laws
Larger Capital
DEMERITS

D ivided control
E mploying lower quality workers
M ore chances of disputes
E xpansion problem
R isk of loss
I nadequate capital L ack of public confidence
T ransfer of share Limited life
S low decision making
U nlimited liability
 TYPES OF PARTNERS

 General Partner
 Active Partner
 Sleeping Partner

 Special Partners
 Others

Contd……..
 Contd……..

 Others
 Secret Partner
 Nominal Partner

 Minor Partner

 Partner at will

 Partners in Profit only

 Partner by Estoppel