Opportunities increase when you help others win, a little win for your partner is a little win for you! ~ Anonymous.
To know what are the various types of partnership, we need to know who is a partner and who shall be regarded as a partner? In this article we shall get to know more about the concept of partners in a partnership firm and various sections which covers it. Though, by knowing this we need to remember a very important fact of partnership, which is –
“All partners are Principal and Agent of each other, no one acts as just an agent or a principal in partnership”.
WHO CAN ACT AS A PARTNER?
S. 6 of the Partnership Act makes it clear for us to know that – who could be the partner or a person to be a part of a firm. The section says –
In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together.[i]
To explain this part of Section, further the Act provides for explanations which are as follows –
Explanation 1 : The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such person partners.
To understand this notion, we shall consider an imaginary situation, like, A, B, C are partners and the property used by the firm is of A, this property has a Joint owner D, as he is A’s brother, but since D has not signed any agreement to be a partner he can’t be considered as a partner. Though, the profit could be given to him as he too has his share in the property.
Explanation 2 : The receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned by a business, does not of itself make him a partner with the persons carrying on the business.
These receipts could be by the lender, widow of a deceased partner, servant or agent asking for remuneration or by the previous owner or part owner for the sale of goodwill or shares (Remuneration is the money paid for the work or services).
Thus, making it very clear who can act as a Partner in a firm. Let us now get going with the topic.
TYPES OF PARTNERSHIP –
A partnership can be of 4 types on two basis, which are –
- On the basis of regards to duration –
- Partnership at Will
- Partnership for a Fixed Period
- On the basis of extent of business –
- Particular Partnership
- General Partnership
Partnership at will –
It is defined under the S. 7 of the Act, and the name itself clearly suggest that the duration of partnership is not clearly defined and is not contractually created. Also, what is the tenure of the Partnership is not clearly specified. But, in this, there’s a drawback, where any partner can leave the firm without any notice.
Partnership for a fixed period –
The contract has been created which specifies the duration of partnership and partnership shall be terminated after that. Or, if partners want to continue, then they have to create another contract for the same. Notice is required for Dissolution of the firm.
Particular partnership –
It is defined under the S. 8 of the Act, which says a person agrees to be a partner for a single adventure organized for the prosecution and conduction of the continuous business. Particular Partnership is similar to partnership at will. Though at will partnership could be for more than one adventure.
Though, also firms can’t get into a partnership with each other. As in A firm can’t get into partnership with B firm. But, companies and partners can get into partnership!
General partnership –
Where a partnership is constituted with respect to the business in general. The liability between the partners shall be continued. This could be created by the agreement, proof of existence, and estoppel. The partners are jointly and severally liable for the legal actions and profits of the firm.
For example, if a partnership defaults on a payment to a creditor, the partners’ personal assets are subject to attachment and liquidation to pay the creditor.
[i] S. 6 of Indian Partnership Act, 1932, Taxmann Publication
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