Know About
Partnership Firm
A partnership firm is a first choice of entrepreneurs because of its simplicity and flexibility. It permits multiple individuals to come together to work and combine their skills, resources and their abilities to manage a business. The first step in formalizing your partnership and ensuring its legal recognition is to register your partnership business.
The Indian Partnership Act, 1932, which defines a partnership as a profit-sharing arrangement between two or more partners, governs and regulates partnership firms. The Partnership Agreement is a document that outlines the duties and liabilities of the partners as well as profit sharing. A partnership is a legal contract between two partners based on conduct and mutual understanding.
Types of Partnership Firm in India
1. General Partnership: All the partners have equal rights and are involved in business management and decision-making. The general partner contributes work, resources, and skills to achieve the firm’s financial goals. A partner in a general partnership is entitled to unlimited liability and the power to decide how the business will run.
2. Partnership at will: Partnership at will is defined in Section 7 of the Indian Partnership Act, 1932 as when the partners make no agreements regarding the terms of their partnership, or duration of their partnership. Partnership at will requires the following two conditions in order to be possible:
- There is no fixed duration of the partnership to exist
- There is no determination of the partnership.
3. Particular partnership: A particular partnership is established to manage and operate a particular business or project. The partnership may be dissolved after the particular goal has been achieved. However, by making an agreement, the partners can carry on with the said partnership. If there is no agreement the particular partnership is dissolved.
Benefits of Partnership Firm
- Decision making: As per the Partnership agreement, each partner is required to perform certain duties and responsibilities.The partners are involved in the firm’s decision-making procedures. Each partner offers a unique viewpoint, set of abilities, expertise, and information to the company.
- Ease of Formation: A partnership firm has less legal and compliance requirements, which makes it simple to establish. To begin operations, the partnership firm needs a partnership deed. Financially, since there is no minimum capital needed to incorporate a partnership firm, a partnership can be started with zero paid up capital.
- Right of Ownership: Roles, duties, and profit-sharing details of the company are outlined in the Partnership Agreement. In running the firm, each partner has to contributes his part. The agreement defines the rights, powers and responsibilities of each partner. It avoids conflicts and ensures the protection of rights.