Law of Partnership

History:
Law of Partnership is contained in
the Partnership Act, 1932 which
came into force on 1st October
1932. It extends to the whole of
Pakistan (Sec.3)

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 Law of Partnership
Definition:
“A Partnership is a Voluntary association of
two or persons, who contribute,money,
Property, time, care or skills, to carry on,
as co-owners, a lawful business for profits
and to share the profits and losses of the
business”

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 Law of Partnership
Characteristics:
• Legal entity
• Agreement
• Number of Partners
• Existence of Business
• Sharing of Profit
• Unlimited Liability
• Capital

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 Law of Partnership
1. Good faith
2. Management
3. Control
4. Transfer of Interest
5. Duration

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 Law of Partnership
Legal Entity:
A partnership has no separate legal entity apart
from its members.
The firm and the partner are not separate from
one another.
2. Agreement:
A partnership is the result of an agreement b/w
persons
An agreement may be written or oral

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 Law of Partnership
3. Number of Partners
There must be at least two persons to form
a partnership
The maximum limit to the number of
partners is 20
4. Existence of Business:
The partners must agree to carry on a
business

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 Law of Partnership
5. Sharing of Profit;
The agreement b/w the parties must
be to share the profits of a business
Distribution of Profit will be among the
partners according to their agreement
6. Unlimited Liability:
The liability of all the partners is
unlimited in case of firm’s debt

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 Law of Partnership
7. Capital:
The Capital of the firm is supplied by all the partners
In some cases not necessary to contribute the capital by all the
partners
8. Good Faith:
A Partnership business is based on mutual
confidence and trust of the partners

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 Law of Partnership
9. Management:
Every Partner can take part in the conduct
and management of the business of the firm
10. Control:
Control is depend on the terms of the firms
All partners take an active part in the conduct
of the business

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 Law of Partnership
11. Transfer of Interest:
Shares cannot be transfer to outsider without the
consensus of all the partners

12. Duration:
Partnership continues at the will of the partners

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 Kinds of Partners
• Active Partners
• Sleeping Partners
• Nominal Partners
• Senior Partner
• Junior Partner
• Partner in Profit only
• Secret Partner
• Minor Partner

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 Kinds of Partners
• Active Partners:
Who takes active part in
the management
2. Sleeping Partners:
Who not take active part
in the management
3. Nominal Partner:
Who lends his name and
reputation to the firm.

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 Kinds of Partners
4. Senior Partner:
Who has a more investment in the firm and
receive more profit
5. Junior Partner:
Opposite to the senior partner
Young person and recently join the partnership

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 Kinds of Partners
6. Partner in Profit only:
Who share the profits of the firm but not
liable for losses
7. Secret Partner:
Whose membership is kept secret from
outsiders
8. Minor Partner:
A person who has not competed 18 year of
age

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 Types of Partnership
• Partnership-at-will

2. Particular Partnership

3. Limited Partnership

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 Types of Partnership
• Partnership-at-will:
Where no provision is made in the agreement
regarding the duration of the partnership
Any partner can terminate it any time by
giving the notice
For unlimited period
Formed for particular project

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 Types of Partnership
2. Particular Partnership:
When partnership is formed to
do a particular business or for a
particular period
For example: partnership for
work on the production of film

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 Types of Partnership
3. Limited Partnership:
Formed in Act 1907of England
In Pakistan there is no limited partnership
Following are the features in Limited Partnership
One or more partners are with limited liability
At least one Partner with unlimited liability
The firm must be registered
Limited partners can inspect the books of the firm at any
time
Limited partner cannot take active part in the
management
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 Video Discussion
The Five Key Factors can determine
the viability to Any Business
Partnership:
• Values
• How do you deal with the conflict
• Work ethics
• Integrity
• Vision

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