1.
What is Partnership?
The
first paragraph of section 4 of the Partnership Act defines partnership as a
relation between persons who have agreed to share the profits of the business
carried on by all or any of them acting for all. Partnership is thus not a
contract nor an agreement but is merely a relation between persons who have
entered into an agreement.
2.
Essentials of a partnership
From
the definition of partnership as given above it can safely be laid down that to
constitute a partnership between two or more persons the following ingredients
must co-exist;
i.
the persons concerned must be carrying on some business;
ii.
the persons carrying on the business must have entered into an agreement;
iii.
the agreement must be to share the profits of the business; and
iv.
the business must be carried on by all the persons or by any of them acting for
all.
The
constitute partnership all these four elements nust exist. If any one or more
of them are missing the relation will not be that of partnership between the
persons and the persons concerned will not be partners as defined in the said
section.
3.
Partnership agreement
It
is the most important document of the partnership which includes the terms and
conditions relating to partnership and the regulations governing its internal
management and organization.
4. Important provisions of partnership deed
The
usual provisions which should be contained in such documents are as follow
i.
Name of firm
Name
of the firm under which the business is to be conducted.
ii.
Nature of business
Nature
of the business to be conducted by the partners must be stated.
iii.
Location
Location
of the business where it is to be operated.
iv.
List of partners
List
of partners, their names, addresses of the partner should also be placed in the
agreement.
v.
Amount of salary
The amount
of any salary payable to partners.
vi.
Division of work
The
division of work among the partners for the management of the firm.
vii.
Amount of profit
The
fixation of the amount of profit payable to any employee other than salary.
viii.
Head office and branches
Allotment
of the place for head office and branches.
ix.
Dealing bank
The
name of the dealing bank.
x.
Additional capital
How
further capital, if necessary, is to be introduced.
xi.
Audit of accounts
Provisions
regarding the reparation, audit and signing by the partners of annual accounts.
xii.
Duration of partners
Duration
of partnership, whether it is in definite period of time or indefinite period
of time.
xiii.
Date of commencement
Date
of the commencement of the business.
xiv.
Total capital
The
total capital of the firm and the share of each partner in the capital.
xv.
Ratio of profit
The
ratio of sharing profits and losses of each partner.
xvi.
Amount of drawing
The
amount that each partner shall be allowed to withdraw in anticipation of
profits.
xvii.
Interest on capital and drawings
Whether
interest to be allowed on capital and charged on drawings and at what rates.
xviii.
Rules of admission and withdrawal
Rules
regarding to retirement, debt and admission of partner, including minor.
vix.
Determination of good will
How
the value of goodwill in determined and accounts will be cleared of retired or
deceased partner.
xx.
Period of accounts
Period
after which final accounts are to be prepared.
xxi.
Rights and duties of partners
Clauses
as to the rights and duties of each partner.
xxii.
Loan and interest
Provisions
in regard to amount to be brought in by any of the partners by way of loads and
interest thereon.
xxiii.
Settlement of accounts
Settlement
of accounts at the dissolution of firm.
xxiv.
Arbitration
Provision
for arbitration in case of dispute among the partners.
xxv.
Deficiency in capital
How
to deficiency in capital will be covered at the insolvency of any partner.
xxvi.
Witnesses
The
date and witness of agreement.
xxvii.
Ways of dissolution
The
manner under which the firm any be dissolved.
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