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Introduction
to Business MGT 211
VU
Lesson
7
PARTNERSHIP
(Continued)
What
is Partnership Agreement? Discuss
important points of this
document. Discuss its
contents.
PARTNESHIP
AGREEMENT
Partnership
deed or agreement is a document in
which the relations of
partners with one
another
are clearly written. It is
the most important document
of partnership, which
includes
the
terms and conditions related
to partnership and the
regulations governing its
internal
management
and organization. It may be
oral or written. But it is
necessary to have the
agreement
in writing.
DEFINITION
"Partnership
deed or agreement is a document
which includes the terms
and
conditions
related to the partnership;
and regulations governing
its internal management
and
organization."
PROVISIONS
Following
are the important provisions
of partnership deed:
1.
Date
Date
of starting the business
should be written in
it.
2.
Name of the
Business
Name
of the firm under which
the business is to be conducted
should be written in
it.
3.
Nature of Business
Nature
of business to be conducted by the
partners should be
mentioned.
4.
Location of Business
Location
of business, i.e. where it is to be
operated, should be written in
it.
5.
List of Partners
List
of partners, their names,
addresses and other
particulars should be
mentioned.
6.
Duration of partnership
Duration
of partnership, whether it is for a
definite period of time or
indefinite period of
time,
should
be written.
7.
Dealing Bank
The
name of dealing bank should
be written in it.
8.
Division of Work
Division
of work among the partners,
for the management of the
firm, should be written
clearly
in
it.
9.
Deficiency of Capital
How
the deficiency of capital
should be covered at the
time of insolvency of any
partner must
be
clearly stated.
10.
Total Capital
Total
capital of the firm and
share of each partner in the
capital should be mentioned in
it.
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Introduction
to Business MGT 211
VU
11.
Additional Capital
How
further capital, if necessary,
should be introduced; must be
mentioned in it.
12.
Amount of Drawings
The
amount, which each partner
would be allowed to withdraw, in
anticipation of profit,
should
be
clearly stated.
13.
Amount of Salary
The
amount of salaries payable to
the partners should be
written in it.
14.
Amount of Profit
The
fixation of the amount of
profit payable to any
partner, other than the
salary, should be
mentioned
in it.
15.
Arbitration
In
case of dispute, provisions
for arbitration should also
be available.
16.
Rules of Admission and
Retirement
Rules
regarding admission and
retirement of partners should be
clearly written.
17.
Period of Accounts
Period,
after which final accounts
are to be prepared, should be
written in it.
18.
Rights and Duties of
Partners
There
should also be the
provisions of rights and
duties of each
partner.
19.
Witness
The
witness of agreement provisions
should be mentioned.
20.
Ways of Dissolution
The
ways, under which the
firm may be dissolved,
should also be written in
it.
CONCLUSION
The
above mentioned points are
not included in the final
list of the clauses. Any
clause, which
is
mutually agreed to be accepted by
the partners, can be
included in the agreement. If
the
deed
is silent on any point, then
provisions of Partnership Act,
1932, should be
applied.
What
are the rights, duties
and liabilities of a partner in
the absence of
partnership
agreement?
INTRODUCTION
A
partnership agreement may
contain special provisions
regarding the rights, duties
and
liabilities
of the partners. But in the
absence of such an agreement
the rules laid down in
the
Partnership
Act, 1932, are
applicable.
What
is Partnership Deed?
"Partnership
deed or agreement is a document
which includes the terms
and
conditions
related to the partnership;
and regulations governing
its internal management
and
organization."
RIGHSTS
OF PARTNERS
Section
123 and 13 of Partnership
Act, 1932, describe the
following rights of the
partners:
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Introduction
to Business MGT 211
VU
1.
Rights of Participation
Every
partner has a right to take
part in the conduct of the
business.
2.
Right of share in
Profits
All
the partners are entitled to
share the profits of the
firm equally.
3.
Right to Exercise
Power
To
protect the firm from
loss, every partner has a
right to use his
power.
4.
Right of Existence
A
partner cannot be expelled by
any other partner from
the business. Every partner
has a
right
to live in the
business.
5.
Right of Retirement
Every
partner has a right to
retire from the firm
after serving a
notice.
6.
Right of Inspection
Every
partner has a right to check
the accounts of the
business.
7.
Right of Salary
A
partner has a right to
demand for the salary,
for performing his duties in
the management of
the
business.
8.
Indemnify the
Expense
A
partner has a right to be
indemnified by the firm, in
respect of any payment made
by him in
the
ordinary course of business, or in an
emergency, for the purposes
of protecting the
firm
from
loss.
9.
Issue of Receipt
A
partner has a right to
collect the debts of the
firm and to issue the
receipts.
10.
Interest on Capital
If
a partner make any advance
in addition to the amount of
his capital, he will be
entitled to
receive
interest at the rate of 6%
per annum.
11.
Participation in the
Management
A
partner has a right to
participate in the management of
the firm.
12.
Right to Use the
Property
Every
partner has an equal right
to use the firm's property
exclusively the purpose
of
partnership.
13.
Right to Act as an Agent
Every
partner has a right to act
as an agent on behalf of the
remaining partners.
DUTIES
OF PARTNERS
According
to section 9 of Partnership Act,
1932, the general duties of
the partners are as
follows:
"Partners
are bound to carry on the
business of the firm to the
greatest common
advantage,
to be just and faithful to
each other and to render
true accounts, and to
provide
full information about the
things affecting the firm,
to any other partner or
to
their
legal representatives."
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Introduction
to Business MGT 211
VU
1.
Utmost Good Faith
Every
partner is bound to give
true and full information
under the principle of
"utmost good
faith".
All the partners should be
just and faithful to one
another.
2.
Maximum Common
Benefit
It
is the duty of the partners
to work for the maximum
common benefit.
3.
Maintenance of True
Accounts
Every
partner should prepare the
true account of the firm
for other partners.
4.
Use of Powers within
Limit
It
is the duty of the partner
that he should use his
powers within the limits,
delegated by the
firm.
5.
Use of Property
It
is the duty of a partner
that he must not use
the property of the firm
for his personal
interest
or
benefit.
6.
Provide all
Information
It
is the duty of the partner
that he must provide all
the necessary information
about the
business
to other partners.
7.
Profit should be paid to the
Firms
If
a partner earns profit
through any source of the
firm. It should be paid to
the management of
the
firm.
8.
Distribution of Loss
In
the absence of agreement,
each partner should pay
the loss equally.
9.
Compensation of Loss
If
a partner commits a fraud
with his co-partners, he
must compensate the
loss.
10.
To be Sincere and
Careful
Every
partner must be sincere,
careful and faithful to
other partners. He should
discharge his
duties
very fairly.
11.
To Maintain the Secrecy of
the Firm
It
is the duty of a partner
that he should maintain the
secrecy of the business from
outsiders.
12.
To Abide by the
Decisions
A
partner should abide by the
decisions made by the
majority of the
partners.
13.
Not to Enter into a Private
Agreement
A
partner must not enter
into private agreement with
a customer of the firm. If he
does so, it is
his
duty to share his profit
with his co-partners.
14.
Not to Use the Firm's
Name
A
partner is not allowed to
use the firm's name
and property for the
satisfaction of his
personal
need.
If he does so and gets
profit out of it, he must
share it with his
co-partner.
LIABILITIES
OF PARTNERS
Generally,
the liability of a partner is
unlimited. Thus, each
partner is liable not only
to the
extent
of his share in partnership,
but his personal property is
also used up to clear the
debts
unless
the proves that his
liability is limited to the
extent of his share in the
assets of the firm.
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Introduction
to Business MGT 211
VU
According
to section 13 (c) of Partnership
Act, 1932, subject to
contract between the
partners,
the liabilities of a partner
are as follows:
1.
Joint liabilities of Partners
for all Debts
Every
partner is liable, jointly
with all other partners
for all acts and
debts of the firm.
2.
Liability of New
Partner
A
new partner is liable for
all the acts of a firm,
which are performed after he
becomes a
partner.
3.
Liability of Retired
Partner
A
retired partner is not
responsible for any act of
the firm after the
date of his
retirement.
4.
Liability of Deceased
Partner
If
a partner dies and the
firm suffers losses, then
the property of the deceased
partner cannot
be
held liable for any
payment.
5.
Liability of an Expelled
Partner
An
expelled partner is not
liable to suffer the losses
and pay the debts of
the firm, which
arise
after
his expulsion from the
firm.
6.
Liability of Fraud
If
any partner commits a fraud,
then partners are also
equally liable with him,
for it.
7.
Liability of Insolvent
Partner
The
firm is not liable for
any transaction of the
insolvent partner, after the
date of his
insolvency
is declared by the
court.
8.
Liability due to Willful
Negligence
A
partner is liable to make
good the losses, arising
due to his willful
negligence.
9.
Share in Loss
In
case of loss, all the
partners will have to bear
the loss equally.
10.
No Private use of
Property
A
partner cannot use the
property of the firm or its
goodwill for his private
gains. If he does so,
he
is liable to surrender the
profits, so earned, to the
firm.
DISSOLUTION
OF FIRM
According
to Section 39 of Partnership Act,
1932:
"The
dissolution of partnership among
all the partners of firm is
called dissolution of
firm."
Explanation
It
means that dissolution of
firm includes the
dissolution of partnership. But
when partnership
is
dissolved, firm may or may
not be dissolved; because
business may be conducted by
the
surviving
partners on the retirement,
death or insolvency of any
partner.
MODES
OF DISSOLUTION OF FIRM
According
to partnership Act, 1932,
the dissolution of firm may
take place through
following
ways:
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Introduction
to Business MGT 211
VU
1.
Dissolution
by Agreement
2.
Dissolution
by Notice
3.
Compulsory
Dissolution
4.
Contingent
Dissolution
5.
Dissolution
by Court
DISSOLUTION
BY AGREEMENT
A
firm may be dissolved with
the consent of all the
partners or in accordance with
the contract
made
between the partners.
DISSOLUTION
BY NOTICE
In
case of partnership at will,
the firm may be dissolved by
any partner, serving a
notice in
writing,
of 14 days, to all the other
partners of his intention to
dissolve the firm. The
firm is
dissolved
as from the date mentioned
in the notice.
COMPULSORY
DISSOLUTION
Following
are the causes of compulsory
dissolution of firm:
1.
Insolvency
Insolvency
of all the partners or any
one partner may become
the cause of
compulsory
dissolution.
2.
Unlawful Business
The
firm is dissolved if its
business becomes
unlawful.
CONTINGENT
DISSOLUTION
A
partnership firm may be
dissolved due to the
following reasons:
1.
Expiry of Period
If
a firm is established for a
fixed period, then it will
be dissolved after the
expiry of period.
2.
Completion of Particular
Venture
A
firm may be dissolved after
the completion of particular
venture, for which it is
formed:
3.
Death of a Partner
A
partnership firm may also
dissolve with the death of a
partner.
4.
Insolvency
Insolvency
of a partner also serves as a
notice for dissolution of
firm.
DISSOLUTION
BY COURT
The
court may dissolve a firm
due to the following
reasons:
1.
Case of Unsound
Mind
A
partnership firm may be
dissolved by the order of
court, if any partner
becomes of unsound
mind.
2.
Case of Incapable
Partner
A
partnership firm may be
dissolved by the order of
court if any partner
permanently become
incapable
of performing his
duties.
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Introduction
to Business MGT 211
VU
3.
Case of Misconduct
A
partnership firm may be
dissolved if a partner is found
guilty of misconduct in affairs
of
business.
4.
Transfer of Interest
A
partnership firm may be
dissolved if any partner
transfers his share of
interest to other
persons,
without the consent of
existing partners.
5.
Breach of Agreement
A
partnership firm may be
dissolved if any partner
commits a breach of
agreement.
6.
Assurance of Loss
Court
may dissolve a partnership
firm if the business of that
firm is suffering from
continuous
loss.
7.
Others Reasons
The
court has the right to
accept or reject the
application of dissolution. The
just and equitable
reason
is determined by the
court.
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Table of Contents:
- INTRODUCTION:CONCEPT OF BUSINESS, KINDS OF INDSTRY, TYPES OF TRADE
- ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:THE ECONOMIC ENVIRONMENT
- BUSINESS ORGANIZATION:Sole Proprietorship, Joint Stock Company, Combination
- SOLE PROPRIETORSHIP AND ITS CHARACTERISTICS:ADVANTAGES OF SOLE PROPRIETORSHIP
- PARTNERSHIP AND ITS CHARACTERISTICS:ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP
- PARTNERSHIP (Continued):KINDS OF PARTNERS, PARTNERSHIP AT WILL
- PARTNERSHIP (Continued):PARTNESHIP AGREEMENT, CONCLUSION, DUTIES OF PARTNERS
- ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:ETHICS IN THE WORKPLACE, SOCIAL RESPONSIBILITY
- JOINT STOCK COMPANY:PRIVATE COMPANY, PROMOTION STAGE, INCORPORATION STAGE
- LEGAL DOCUMENTS ISSUED BY A COMPANY:MEMORANDUM OF ASSOCIATION, CONTENTS OF ARTICLES
- WINDING UP OF COMPANY:VOLUNTARY WIDNIGN UP, KINDS OF SHARE CAPITAL
- COOPERATIVE SOCIETY:ADVANTAGES OF COOPERATIVE SOCIETY
- WHO ARE MANAGERS?:THE MANAGEMENT PROCESS, BASIC MANAGEMENT SKILLS
- HUMAN RESOURCE MANAGEMENT:Human Resource Planning
- STAFFING:STAFFING THE ORGANIZATION
- STAFF TRAINING & DEVELOPMENT:Typical Topics of Employee Training, Training Methods
- BUSINESS MANAGER’S RESPONSIBILITY PROFILE:Accountability, Specific responsibilities
- COMPENSATION AND BENEFITS:THE LEGAL CONTEXT OF HR MANAGEMENT, DEALING WITH ORGANIZED LABOR
- COMPENSATION AND BENEFITS (Continued):MOTIVATION IN THE WORKPLACE
- STRATEGIES FOR ENHANCING JOB SATISFACTION AND MORALE
- MANAGERIAL STYLES AND LEADERSHIP:Changing Patterns of Leadership
- MARKETING:What Is Marketing?, Marketing: Providing Value and Satisfaction
- THE MARKETING ENVIRONMENT:THE MARKETING MIX, Product differentiation
- MARKET RESEARCH:Market information, Market Segmentation, Market Trends
- MARKET RESEARCH PROCESS:Select the research design, Collecting and analyzing data
- MARKETING RESEARCH:Data Warehousing and Data Mining
- LEARNING EXPERIENCES OF STUDENTS EARNING LOWER LEVEL CREDIT:Discussion Topics, Market Segmentation
- UNDERSTANDING CONSUMER BEHAVIOR:The Consumer Buying Process
- THE DISTRIBUTION MIX:Intermediaries and Distribution Channels, Distribution of Business Products
- PHYSICAL DISTRIBUTION:Transportation Operations, Distribution as a Marketing Strategy
- PROMOTION:Information and Exchange Values, Promotional Strategies
- ADVERTISING PROMOTION:Advertising Strategies, Advertising Media
- PERSONAL SELLING:Personal Selling Situations, The Personal Selling Process
- SALES PROMOTIONS:Publicity and Public Relations, Promotional Practices in Small Business
- THE PRODUCTIVITY:Responding to the Productivity Challenge, Domestic Productivity
- THE PLANNING PROCESS:Strengths, Weaknesses, Threats
- TOTAL QUALITY MANAGEMENT:Planning for Quality, Controlling for Quality
- TOTAL QUALITY MANAGEMENT (continued):Tools for Total Quality Management
- TOTAL QUALITY MANAGEMENT (continued):Process Re-engineering, Emphasizing Quality of Work Life
- BUSINESS IN DIGITAL AGE:Types of Information Systems, Telecommunications and Networks
- NON-VERBAL COMMUNICATION MODES:Body Movement, Facial Expressions
- BUSINESS ORGANIZATIONS:Organization as a System
- ACCOUNTING:Accounting Information System, Financial versus Managerial Accounting
- TOOLS OF THE ACCOUNTING TRADE:Double-Entry Accounting, Assets
- FINANCIAL MANAGEMENT:The Role of the Financial Manager, Short-Term (Operating) Expenditures