Business Law & Taxation

PARTNERSHIP ACT
1932

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
PARTNERSHIP ACT

Partnership act 1932

“A partnership is a voluntary association of two or more persons, who contribute

money, property, time and skill to carry on business for profit and share the losses of
the business.

“An association of two or more who carry on as co-owners, a business for profit.

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
PARTNERSHIP ACT

Essentials of Partnership

1. Legal Entity
A partnership has no separate entity apart from its members. It means that partner-
ship and partners are not separate from one another. The rights and liabilities of
parties are considered the right and liability of partners. If any of the partner dies,
retire or become insane, the partnership comes to end.
2. Agreement
A partnership is the result of an agreement between two or more persons.

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
PARTNERSHIP ACT

3. Number of Partners
At least 2 person are required to create a partnership and Maximum 20 Persons.
4. Existence of Business
The partner must agree to carry a certain business.
5. Sharing of Profit
The profit/Loss shared among the partners according to agreement.
6. Mutual Agency
Each partner act as an agent of other partner of the firm
7. Unlimited Liability
The private assets of partners can be share to adjust the claims

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
PARTNERSHIP ACT

8. Capital
Capital is contributed according to agreement. Equal contribution is not mandatory.
A person without contribution of any Capital can become a Partner.
9. Utmost faith
The partner must be fair and honest with each other, No secret profit involve.
10. Management
Usually, management work divided among the partners according to experience.
11. Control
The control of business decision as per mentioned in agreement.

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
PARTNERSHIP ACT

12. Transfer of Ownership

The ownership of partnership of a partner, cannot be transferred to a third person
without consent of all partners.
13. Duration
The partnership is long as partners are willing to run.

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
PARTNERSHIP ACT

Advantages of Partnership
• Easy Formation • Large Capital
• Better Management • High credit standing
• More Participation • Skilled Employee
• Public Relation • Quick Decision
• Sharing of Risk • Personal Supervision
• Easy Dissolution

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
PARTNERSHIP ACT

• Formation of Partnership
There must be an agreement between partners to form a partnership.
1. The partners of a firm should be selected with care.
2. The object of firm should be lawful
3. The rights and duties of partner must be discussed in detail and in writing
4. The partnership should be registered, if unregistered it will create problem.

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
PARTNERSHIP ACT

Partnership Deed
The partnership agreement in written is called partnership deed
Types of Partnership
1. Partnership at will (No duration is mentioned)
2. Particular Partnership, (For a Particular Business)
3. Limited Partnership

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
PARTNERSHIP ACT

Registration of a Firm
The Registration of a partnership is not compulsory. If the partners so desire, they
may get their firm registered. The registration of a firm is only a proof of existence
of the firm. It does not provide the legal entity to the firm.
Procedure of Registration of a Firm
The Procedure of Registration of a firm is as follow.
1. Submission of an Application
The application with subscribed form and fee submitted to registrar of a firm. Duly
signed with all partners along with detail of business and partners.

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
Procedure of Registration of a Firm

2. Certification
The registrar examine the application and if satisfies than register the firm. He than
issue a certificate of Registration. This complete the procedure of registration.
3. Change of Particulars
Any change in mentioned detail should be informed to registrar.
4. Penalty for False Particular
The person who provides false information to the registrar shall be punished. Which
may extend to three months prison or fine.

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
Dissolution of a firm

Dissolution of a firm
1. Dissolution by agreement
The firm may be dissolved with consent of all partners or in accordance with
contract between partners.
2. Compulsory Dissolution
When all partners declared insolvent or all except one
When the business of the firm become unlawful

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
Dissolution of a firm

3. Contingent Dissolution
Subject to contract between partners, a firm is dissolved on the happening of follow-
ing events.
• On the expiry of fixed period for which firm is formed.
• On the completion of the project for which the firm was formed.
• On the death of a partner
• On the insolvency of any partner
• On the resignation of a partner

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
Dissolution of a firm

4. Dissolution by Notice
When partnership is at will, the firm may be dissolved by any partner giving notice
in writing to all the other partners.

5. Dissolution by Court
The court decided dissolution of a firm, if there is difference of opinion between the
partners about dissolution of firm. e.g. When a partner become insane, one partners
wants to continue while others insisting of dissolution,

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)
 Business Law & Taxation
Dissolution of a firm

The court may dissolve the firm on following grounds.

• Insanity
• Permanent Incapacity
• Misconduct
• Breach of Agreement
• Transfer of Interest
• Continuous Losses
• Just for equitable

From the desk of Accounting and Finance Faculty –

(Business Law and Taxation Team)