The Indian Partnership Act 1932ppt

The Indian
Partnership Act, 1932
Definition
Section 4 of the Indian Partnership Act, 1932

defines Partnership as the relation between
persons who have agreed to share the profits
of a business carried on by all or anyone of
them acting for all.
The persons who enter into such relationship
are called PARTNERS
Essential Elements of
Partnership
Association of two or more persons
Result of an agreement
Partnership relation based on Contract.

Implied or Express (Oral or Written)
Must carry on some business
Max. limit : 10 for banking; 20 for other business
Trade, Occupation or Profession
Share profits of the business

Business is carried on by all or any one of them
acting for all (mutual agency)
Mode of Creating
Partnership
Based on agreement
Agreement may be express or implied
In Writing : helpful in times of adversity

Written agreement : Partnership Deed
Essence of Partnership : Trust & Confidence

Drafted with care and signed by all partners
Stamped in accordance with Indian Stamp
Act
Firm should be registered and copy of the
Deed to be filed with the Registrar
Partnership Deed
Prepared for resolving mutual differences

Usual Contents :
Date of Agreement
Name and Address of the Firm
Name and Address of the Partners
Nature of Business
Duration of Partnership
Capital invested by each partner
Ratio to divide profits and loss
Partnership Deed
Usual Contents Contd. :
Appointment of Auditor and remuneration

Drawing by partners and interest
Interest on Capital and Advances
Salary and Commission payable to partners
Duties, Functions and Powers of Partners
Rules regarding admission, retirement and death
Dissolution
Arbitration
Method of valuation of Goodwill
Firm Name
Name under which the business is carried on

Any name
Should not be a name already adopted by a
reputed firm, to mislead public
Should not contain words : Crown, Emperor,
King, Queen, Royal, Empire, Imperial or
words expressing or implying the sanction,
approval or patronage of Government
Property of the Firm
Joint property of all the partners as opposed

to their personal property
Property includes
Originally brought into firm by partners

Acquired by the firm
Acquired by one or more partners for the purpose
of business
Goodwill of the firm
To be held and used by all partners for the

purpose of business (not for private use)
Positions
Lunatic : cannot become a partner

Alien Enemy : cannot become a partner
Alien Friend : can enter into contract
Woman : Married or Unmarried can be a
partner
Insolvent : Cannot become a partner; ceases
to be a partner from date on which order was
passed by court
Position of Minor
Sec 30(1), A person who is a minor according

to law to which he is subject may not be a
partner in a firm, but with the consent of all
the partners for the time being, he may be
admitted to the benefits of partnership.
A minor can only be admitted to the benefits
of an already existing partnership
Position of Minor
During his Minority

Rights
Right to receive agreed share of profits and

property
Have access to and inspect and copy the
accounts of the firm
If share in profits is not given, can sue (can do if
he wants to sever his connection)
Liabilities
Only to the extent of share in profits and

properties (not personally liable)
Position of Minor
On Attaining Majority
Within six months should give notice whether he

is joining the partnership or not.
If notice not given he shall become a partner
Position of Minor
When a Minor elects to become a partner

Rights
Share remains the same

Rights and Liabilities as that of a full fledged partner
Rights will be the same till the date on which he
becomes a partner
Liabilities
Liabilities will be the same till the date on which he

becomes a partner
Personally liable to third parties for all acts of the firm
from the date of becoming a partner
Position of Minor
When a Minor elects not to become a partner

Rights
Rights will be the same till the date of notice

Entitled to sue for his share of property and profits
Liabilities
Liabilities will be the same till the date of notice

His share of property and profits will not be liable
for any acts of the firm after the date of notice
Types of Partnerships
Partnership at Will
No provision in contract between the partners for
Duration of Partnership
Determination of Partnership
If any partner gives notice of dissolution in writing,

the partnership is dissolved.
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.
Partnership for a Fixed Term
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.
Classes of Partners
Actual or Active Partner
Engaged in actual conduct of the business

His acts binds the firm and other partners
Notice to be given in case of retirement
Sleeping or Dormant Partner
Does not take part in the conduct of business

Contributes his share of capital and enjoys profits and
losses
Not known to outside world
Not liable to third parties for the acts of the firm.
Not required to give notice in case of retirement
Classes of Partners
Nominal Partners
No real interest in business, Does not contribute

any capital, Lends his name only
No share in profits but liable to third parties for all
acts of the firm
Partner in Profits only
Shares the profits but not losses

No interest in the management of the firm
Liability for the acts of the firm is unlimited
Classes of Partners
Partner by Estoppel or Holding Out
Represents himself as a Partner, by words spoken

or written or by conduct
Liable as a partner if credit is given to the firm
based on his representation. He cannot deny.
If a partner does not give public notice and his
name is still used in the business, he is also liable
to third parties
Deceased partner is an exception to this rule.
Limited Liability Partnership
Limited Liability Partnership Act, 2008 came

into effect from 31st March 2009.
LLP: A corporate business vehicle that
enables professional expertise and
entrepreneurial initiative to combine and
operate in flexible, innovative and efficient
manner, providing benefits of limited liability
while allowing its members the flexibility for
organizing their internal structure as a
partnership.
http://llp.gov.in/
Limited Liability Partnership
LLP has separate Legal Entity

Liability of the partners limited to their agreed
contribution
Not liable for the independent or un-authorized actions
of other partners
Perpetual succession
Indian Partnership Act, 1932 not applicable
No maximum limit of members; one partner should be
Indian
Registrar of Companies - register and control LLPs.

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The Indian

Partnership Act, 1932

Section 4 of the Indian Partnership Act, 1932

Partnership relation based on Contract.

Must carry on some business

Max. limit : 10 for banking; 20 for other business

Trade, Occupation or Profession

Share profits of the business

Agreement may be express or implied

In Writing : helpful in times of adversity

Essence of Partnership : Trust & Confidence

Prepared for resolving mutual differences

Usual Contents Contd. :

Appointment of Auditor and remuneration

Name under which the business is carried on

Property of the Firm

Joint property of all the partners as opposed

Originally brought into firm by partners

To be held and used by all partners for the

Lunatic : cannot become a partner

Sec 30(1), A person who is a minor according

During his Minority

Right to receive agreed share of profits and

Only to the extent of share in profits and

Within six months should give notice whether he

When a Minor elects to become a partner

Share remains the same

Liabilities will be the same till the date on which he

When a Minor elects not to become a partner

Rights will be the same till the date of notice

Liabilities will be the same till the date of notice

No provision in contract between the partners for

If any partner gives notice of dissolution in writing,

A person may become a partner with another

Partnership for a Fixed Term

Actual or Active Partner

Engaged in actual conduct of the business

Sleeping or Dormant Partner

Does not take part in the conduct of business

No real interest in business, Does not contribute

Partner in Profits only

Shares the profits but not losses

Partner by Estoppel or Holding Out

Represents himself as a Partner, by words spoken

Limited Liability Partnership

Limited Liability Partnership Act, 2008 came

Limited Liability Partnership

LLP has separate Legal Entity

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