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Partnership

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partnership
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  Introduction of Partnership “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The term is defined as a voluntary contract between two or more competent person to place their money, effects, labor and skill, or some or all of them, in lawful commerce or business, with the understanding that there shall be a communion of the profits thereof  between them. Halsbury defines a partnership as the relation which subsists  between persons carrying on a business in common with a view of profit  Important elements necessary to constitute partnership There are four important elements necessary to constitute partnership. 1.There must be an association of two or more persons to carry on a  business. 2.There must be an agreement entered into by all the persons concerned. 3.The agreement must be to share the profits of a business. 4.The business must be carried on by all or any of the persons concerned acting for all. Types of Partnership Thus, when all these conditions are fulfilled, a group can be registered as  partners. Now there are various types of partnerships. 1. Ordinary Partnerships 2. Limited Partnerships 3. Partnership at-will Ordinary Partnership All of the partners share equal rights and responsibilities in the management of the  business. Likewise, each partner in an ordinary partnership assumes full personal liability for the debts and obligations of the business. And one partner can enter into a contract on behalf of the partnership, making the other partner(s) legally  bound to the terms of the contract. The profit of a general partnership passes through to its owners, making it taxable at each  partner's individual income tax rate. (Partnership losses are also pass- through , giving each partner the ability to offset taxable income from other sources.) Limited Partnership In this kind of partnership one or more partners have limited liability and at least one of the partners has unlimited liability. The liability of the limited   partner is limited to the extent of his investment in the business. a) It is formed under Limited Partnership Act 1907 (of England)  b) One or more partners have limited liability c) There is at least one partner with unlimited liability d) The firm must be registered. Once this is done the rights and duties of the  partners are also recognized. e) A limited partner has no right to take an active role in the management of  partnership. f) The capital invested by the limited partner will not be returned to him as long as he remains a limited partner on the firm. g) The limited partner can inspect the accounts of the firm at any time. h) A new partner can be introduced into the firm at any time without the consent of the limited partners. i) The partnership should not consist of more than 20 partners (whether limited or not) except in the case of banking where they should not exceed 10.  j) The registrar of Joint Stock Companies shall be the registrar of Limited Partnerships. Partnership at-will The essence of a “partnership at - will” is that the partners do not limit the duration of their partnership, and are free to break their relationship at any time they see fit. It is a partnership for indefinite period. The partnership may be dissolved at any  point as long as the partner gives notice to all the other partners. An ordinary  partnership becomes a partnership at-will under the following circumstances: a)   If the partnership is of a indefinite period  b)   If a partnership is formed for a limited period of time, and the firm c)   continues to function after the expiry of this period. d)   If a partnership is formed to conduct a particular venture, and then e)   continues to function after the venture is complete.  Rights Duties and Liabilities of Partners Rights of Partners The different rights of the partners are as follows. 1. Right to take part in business. 2. Right to express opinion. 3. Right to inspect books. 4. Right to share the profits. 5. Right to interest on capital. 6. Right to interest on advances. 7. Right to be indemnified. 8. Right to act in emergency. 9. Right to give Consent. 10.Right to retire. 11.Right not to be expelled. 12.Right to carry on competing business. 13.Right to enforce. 14.Right to share in profits or interest. 15.Right to bind other partners. Duties of Partners (General/ Fundamental /Absolute) The following are the duties of the partners. 1 Duty of good faith. 2. Duty to carry on business. 3. Duty to is to share losses. 4. Duty to use firm’s property for the firm.  5. Duty to account for personal profits. 6. Duty to be liable individually and jointly. 7. Duty to work for the greatest common advantage. 8. Duty to render accounts. 9. Duty of disclosure. 10.Duty to indemnify for frauds. 11.Duty to act within authority. 12.Duty in emergency. 13.Duty not to transfer interest.    Liabilities of Partners The liabilities of the partners are given below. 1. Liability of partner for acts of the firms. 2..Liability of the firm for the wrongful acts. 3. Liability of firm for misapplication. 4. Liability of retiring partner for all the liabilities of the firm prior to his retirement. Registration of Partnership Procedure and Requirements The registration of Partnership firm is not required by law and there is no penalty for non-registration. Nevertheless registration can give my advantages to the firm. First of all Form  –   I needs to be filled. It is attached in appendix B. Then Partnership Deed is prepared on the Stamp Paper of worth Rs. 500. A sample for the statement of Partnership Deed is also added in appendix B. Registration fee of Rs. 500 also needs to be deposited in National Bank of Pakistan through Challan Form. It is mandatory for the firm to be located in commercial area. Copy of Lease Agreement or Ownership proof needs to be provided as well. A template of Lease Agreement is attached in appendix B. The next requirement is the attachment of computerized National Identity Cards of Partners and Witnesses. It is mandatory that all papers should be attested from  Notary Public. And the partners should contact the office after three days of submission of papers. All partners are required to appear before Registrar of Firm during 9:00am to 11:00am with their srcinal National Identity Cards. Lastly an affidavit regarding accuracy of papers and existence of office needs to be submitted on stamp paper worth Rs. 5. Partnership Deed “Partnership Deed” is a document that tells about the mutual rights and obligations of all partners. This needs to be signed by all the partners and subsequent copies held by each partner. At the time of registration, a copy of the deed has to be submitted with an application to the Registrar of Firms in the concerned area. This document may also be referred to as an “Article of partnership”. A partnership deed usually contains the following format:

M-5072-SP.pdf

Jul 23, 2017
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