Title IX. - PARTNERSHIP CHAPTER 1 GENERAL PROVISIONS Art. 1767.

By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession. (1665a) Art. 1768. The partnership has a judicial personality separate and distinct from that of each of the partners, even in case of failure to comply with the requirements of Article 1772, first paragraph. (n) Art. 1769. In determining whether a partnership exists, these rules shall apply: (1) Except as provided by Article 1825, persons who are not partners as to each other are not partners as to third persons; (2) Co-ownership or co-possession does not of itself establish a partnership, whether such-coowners or co-possessors do or do not share any profits made by the use of the property; (3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived; (4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment:

(a) As a debt by installments or otherwise; (b) As wages of an employee or rent to a landlord; (c) As an annuity to a widow or representative of a deceased partner; (d) As interest on a loan, though the amount of payment vary with the profits of the business; (e) As the consideration for the sale of a goodwill of a business or other property by installments or otherwise. (n)

Elements of Partnership The essential elements of partnership as a form of business organization are as follows:(i) Association of at least two persons Atleast two persons must joint together to form a partnership. (ii) Contractual relation There must be an agreement between persons desirous of forming a partnership. (iii) Earning of profit The agreement must be to share profit/loss of a business. (iv) Mutual agency The business of partnership may be carried on by all the partners or by any of them acting for all. Thus every partner is an agent of other partners and at the same time of the firm.

Chief Features of a Firm. The salient features of partnership are as under 1. Formation According to the Partnership Act of 1932, there is no special mode for the creation of a partnership. If persons between 2 and 20 enter Into agreement oral or verbal for carrying on a business, with a private gain, then partnership is formed (10 in case of banking business). To avoid misunderstanding, it is desirable that the articles of partnership be prepared in writing with legal assistance. The articles of partnership should cover the rights, duties, obligations and the arrangements which the parties have mutually agreed upon. t is not binding for partnership to be register However, if a 1km remains unregistered, it has to face certain disabilities or disadvantages. 2. Financing The capital is made available to the firm by the partners as per terms of the agreement. It is not necessary that all the partners should contribute equally to the partnership. A person who has special skill or ability can be admitted to the partnership without any capita contribution. 3. Management In a partnership business, every partner has a right to take part in its management. The important business decisions are taken with the consent of all other partners. 4. Restriction on Transfer of Interest No partner can transfer h share to any other person without the prior consent or willingness of all other partners. 5. Unlimited Liability of Partners The liability of the partners of a firm is unlimited. If the business suffers losses end the assets of the partnership are not sufficient to meet its obligations, then the creditors may those to sue any one or all of the partners to satisfy the debt. This poses a serious handicap for the individual partners with large personal assets. He may be compelled to pay the entire debt of the partnership from his personal assets. 6. Duration The partnership is a temporary form of business ownership. It operates at the pleasure of the partners. The partnership can come to an end, if a partners leaves, dies, declared bankrupt or insane it is also dissolved by the partners by obtaining a degree from the court. 7. Taxation . If a firm is registered under the Income Tax Act, the profit of the firm is first divided among the partners and then assessed separately. In case, it is not registered within the meaning of Income Tax Act, the firm will be assessed on total profit. 8. Implied Authority Each partner is an agent of the other partners and at the same time of the firm. This is an implied authority the moment the agreement is entered into between the partners, this authority automatically comes to each of the partners. The regular acts of business such as buying, selling of goods, hiring of employees etc. by a partner is considered the act of the firm or the act of all the partners. Each partner thus is both an agent and a principal. As agents he has the capacity to bind other partners by his acts done. Each partner is principal in the sense that he is bound by the acts of other partners.