INDIAN PARTNERSHIP

ACT
1932

BY
PUJA H.P
AVINASH A.P
KRISHNA PRASAD
PARV SHUKLA
ANIRUDH N.M
SACHIN KUMAR
DONGRE

WHAT IS
PARTNERSHIP???
The

relationship between persons

who have agreed to share the profits
of a business.

As

per Sir Fredrick Pollock. The

English Partnership Act, 1890 defines
partnership as The relation
subsisting between persons carrying
on business in common with a view
to profits.

COMMENCEMENT OF ACT

Received the assent of the GovernorGeneral on 8th april-1932.

It came into force on the 1st day of

October, 1932, except section 69 which had
come into force on the 1st day of October,
1933.

It extends to the whole of India except the

State of Jammu and Kashmir.

TYPES OF PARTNERS
ACTIVE OR MANAGING PARTNERS:
Engaged
His

in actual conduct of business.

acts binds the firm and other partners.

Notice

to be given in case of retirement.

SLEEPING PARTNERS:
Does

not take part in conduct of business.

Contributes
Not

his share of capital and enjoys profits and losses.

known to outside world.

Not liable to third parties for the acts of the firm.

Not

required to give notice in case of retirement.

NOMINAL PARTNER:

No real interest in business, does not contribute any

capital but lends his name and capital to the firm.

No share in profits but liable to third parties for all acts of

the firm.

Alsocalledlimited partneror ostensible partner.

For example: All the brand ambassadors of the

company
who only lend their name for the betterment of the
company as to increase the reputation of the
company.

PARTNER IN PROFITS ONLY

No interest in management
of the firm.
Shares the profits but not
losses.
Liability for the acts of the
firm is unlimited.
SUB-PARTNER and MINOR
AS A PARTNER
are the other types of
partners.

TYPES OF
PARTNERSHIPS
ON THE BASIS OF
DURATION

ON THE BASIS OF
EXTENT OF
BUSINESS

PARTNERSHIP AT WILL

PARTICULAR PARTNERSHIP

PARTNERSHIP FOR FIXED

PERIOD

GENERAL PARTNERSHIP

ON THE BASIS OF
DURATION

PARTNERSHIP AT WILL

No provision in contract between

the partners for duration of
partnership and determination of
partnership.

If any partner gives notice of

dissolution in writing, the partnership
is dissolved.

PARTNERSHIP FOR FIXED

PERIOD
Duration

is fixed

Partnership comes to an
end when the term
expires.

If partners continue the

business after the fixed
period, it becomes
partnership at will.

ON THE BASIS OF EXTENT OF

BUSINESS
PARTICULAR PARTNERSHIP

A person may become a partner

with another person in particular
adventures or undertakings.

On completion of such a venture,

the partnership comes to an end.

DUTIES OF PARTNERS
Loyalty and Good Faith:

Each partner must act in good faith toward the other partners

A partner cannot promote a competing business, and if he does so, he

can be liable for any damages sustained by the partnership.

Respect the Partnership Agreement:

Each partner is bound to obey the restrictions, rules and limitations laid
out in the partnership agreement.

Information:

A partner has the duty to inform the partnership of all matters relevant to
the partnership.

Inspection of Books:

All partners are equally entitled to inspect the books of the partnership

Share of Profits:

Each partner is entitled to a share of the profits.

In the absence of such an agreement, each partner is entitled to an

equal share of the profits.

Cover Company Losses:

If the company experience a loss, damages or levies as a result of

a lawsuit or injury, partners are obligated to contribute to covering
those costs.

Repayment of Loans:

A partner is entitled to
reimbursement of money advanced
to the partnership, such as travel
expenses incurred on partnership
business.

Distribution of Capital:

If a partnership is dissolved, every

partner is entitled to receive a share
of the partnership property after due
payment of all creditors and the
repayment of loans made to the
partnership by the partners.

DISSOLUTION OF THE
FIRM

By mutual consent.

By agreement.

By the insolvency of all the partners.

Business becoming illegal.

DISSOLUTION OF PARTNERSHIP

Expiry of term.

Completion of adventure.

Death of a partner.

Insolvency of partner.

Retirement of partner.

CHARACTERISTICS OF
PARTNERSHIP.

A partnership does not require property, services rendered jointly will also
constitute a partnership.

Partnership is not a product of status like the joint stock companies.

Partnership can arise out of a contract only and not from status as per Section
5 of the Indian Partnership Act.

Limits is min-2 to max -10 in case of banking business and 20 for others.

The agreement of partnership has to fulfil all essentials of a valid contract.

A person may become partner in particular adventures or undertakings as per

Section 8 of the IPA. But a partnership does not exist between the members
of a charitable society or religious association or a building scheme.

The agreement must be to share profits of the business, trade or

undertaking. Unless otherwise so agreed, sharing of profits also involves
sharing of losses.

It is not necessary that all the partners must be actively participate in the
conduct of the business. But a retired partner is not a partner. His annuity
is mere recognition of past services.

Formal or written agreement is not necessary. An agreement to create the

partnership can rise from the conduct of the parties too. The deed of
partnership is not needed as per law but an instrument of partnership is
of great assistance in income tax assessment.

The validity of a partnership firm does not depend upon the capital
contribution by partners.

The word partnership is derived from the term to part that means to
divide. And the division of profits is an essential condition of the existence
of a partnership.

DIFFERENCE BETWEEN COOWNERSHIP AND PARTNERSHIP

CO-OWNERSHIP:

In the co-ownership, property is owned jointly

without any intention to carry on business.
Example:
Two or more persons purchase a car without
any idea of giving it on hire, it is coownership.

BASIS OF
DIFFERENCE

PARTNERSHIP

CO-OWNERSHIP

PROFIT SHARING

profit sharing is the

basic object of
partnership formation.

There is no concept of
profit and loss sharing.

CREATION

Agreement or contract is Where as agreement is

essential in
not essential in COPARTNERSHIP
OWNERSHIP

AGENT

Every partner is an
where as co-owner is
agent of other partner in not the agent of other
the PARTNERSHIP
co-owner in COOWNERSHIP.

LIMIT OF MEMBERS

There is restriction for

There is no restriction
the maximum number of for the maximum
partners in
number of owners in
PARTNERSHIP
CO-OWNERSHIP.

BASIS OF
DIFFERENCE

PARTNERSHIP

CO-OWNERSHIP

TRANSFER OF RIGHTS A partner cannot

transfer his rights to
another person without
consulting the other
partner.

where as a co-owner can

transfer his rights to
anyone without
consultation.

LEGAL CLAIM

A partner has a legal

claim on the property of
partnership.

where as a co-owner has

a legal claim on the joint
property.

DIVISION OF
PROPERTY

A partner has no right to where as a co-owner can

demand the partition of demand the division of
property he can only
property.
demand the share of
profit.

DISSOLUTION RISK

PARTNERSHIP is affected
by the death, insolvency
or retirement of any
partner.

where as COOWNERSHIP cannot be

dissolved due to these
reasons.

MINOR CASE

minor cannot become a

regular PARTNER.

where as a minor can

become a regular COOWNER.

DIFFERENCE BETWEEN
PARTNERSHIP AND HUF

BASIS OF
DIFFERENCE

PARTNERSHIP

HUF(HINDU
UNDIVIDED
FAMILY)

Interest

interest of a partner in
the business is
determined by a
contract

the interest in HUF

business is decided by
the status.

Death

The death of a partner

The death of a member
results in dissolution of a of an HUF does not
partnership
disturb the running of a
business at all. On his
death, his interest is
automatically inherited
by other surviving
members.

Insolvency

In case of insolvency of
a partner, he ceases to
be a member of the firm

the insolvency of a
member of a Hindu
Undivided Family does

BASIS OF
DIFFERENCE

PARTNERSHIP

HUF(HINDU
UNDIVIDED
FAMILY)

New member

A new partner can be

admitted to a
partnership when other
partners agree.

there is no such
condition in the HUF.
Every child by birth
acquires an interest in
the family business.
Membership is
automatic and is
acquired by virtue of
birth in the family.

Number of partners

As regards the number

of partners in a firm, the
membership is restricted
to a maximum of 20.

there is no such limit in

respect of number of
persons constituting an
HUF.

Liability of a partner

The liability of a partner

is unlimited and he is
personally liable to the
outside world for all
practical purposes so far
as the firm's liabilities
are concerned.

but the responsibility of

any member of the IIUF
is limited to the extent
of his share in the HUF.

DIFFERENCE BETWEEN
PARTNERSHIP AND COMPANY
BASIS OF
DIFFERENCE

COMPANY

PARTNERSHIP

Registration

A company comes into

existence only after its
registration under the
Companies Act, 1956.

In case of partnership,
the registration is not
compulsory.

Legal Status

A company is a legal
person and regarded by
law as a single person.

A partnership is a
collection of individual.

Minimum number of
persons

The minimum number of

persons required to form
a company is two in
case of private
companies and seven in
the case of public
companies.

The minimum number

of persons required to
form a partnership is
two.

BASIS OF
DIFFERENCE

COMPANY

PARTNERSHIP

Transferability

A shareholder can
transfer his share
without the consent of
other shareholders.

partnership, a partner
cannot transfer his
share without the
consent of other
partners.

Liability of members

The liability of the

members of a company
is limited

liability of partners for

debts of a firm is
unlimited.

Contractual capacity

The shareholders of a
company can enter into
contract with the
company and can be
employees of the
company.

Partners can contract

with other partners but
not with firm as a whole.

Length of existence

But company having

The death or retirement
legal existence can
of a partner dissolves
continue inspite of death the partnership.
and insolvency of the
members. It has a

Conclusion

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