lecture-25 - PARTNERSHIP ,FORMATION ,TEST AND REGISTRATION...

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Learning Objectives At the end of this chapter, you will able to know: · The Meaning and nature of partnership · The true test of partnership · The types of partnership · The formation of partnership · The registration of partnership Introduction Have you ever heard of partnership? Try to answer what do you mean by partnership in general. Yes, partnership is an association between two or more persons. Let us now discuss about the legal aspects of partner- ship. The Rules and regulations relating to partnership are governed by the Indian Partnership Act 1932. This act contains 74 sections and it came into force on Ist December 1932 except Section 69 (relating to the effect of non – registration of the firms ) which came into force on Ist October 1933. It extends to whole of India except to the state of Jammu and Kashmir Definition Section 4 Indian Partnership Act 1932 defines ‘Partnership’ in the following terms: - “Partnership is the relation between persons who have agreed to share the profit of business carried on by all or any of them acting for all.” Breaking the above definition, following essential elements of partnership are revealed:-1. There must be an agreement. 2.Between two or more persons 3.Who agree to carry on business 4.With the object of sharing profit 5.The business must be carried by all or any of them acting for all or Mutual Agency. All the above elements must coexist in order to constitute partnership. A brief explanation of these elements is as follows: 1. An agreement :- The relationship of partnership arises from an agreement between the persons concerned not from status. Agreement as made between the persons must be valid and enforceable by law. This agreement may be oral or written. To avoid future complications and dispute amongst the persons constituting partnership, agreement in writing must be preferred. Example A & B enters into a contract to carry on business of manufacturing of tin plates; a partnership is exacted between A&B. 2. Two or more persons:- There must be at least two persons to form a partnership. It is obvious that a single person cannot constitute partnership. Only persons competent to contract can enter into partnerships. As to the maximum number of partners, there is no limitation in the partnership Act 1932 but is no limitation in the partnership Act 1932 but the Joint Stock companies Act 1956 provides that in a firm carrying banking business, the number of partners should not be more than 10 whereas in other type of business, the limit is 20 partners. It is also mentioned that in case, the number of partners in the above business are more than the prescribed limit, the partnership will be treated as illegal. 3. Carrying on of business There can be partnership if there is some business is carried under it. Sec 2(b) of the Act reads as under “business” includes every trade, occupation or profession. If the purpose is to carry on charitable work, it will not be partnership. Carrying on of the business means continuity of business activities is required to consider it as partnership business. A and B agrees to
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lecture-25 - PARTNERSHIP ,FORMATION ,TEST AND REGISTRATION...

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