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Introduction to Business

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Introduction to Business ­MGT 211
VU
LESSON 6
PARTNERSHIP (Continued)
Partnership is the second stage in the evolution of forms of business organization. It means
an association of two or more persons to carry on a business for profit.
According to Partnership Act, 1932,
"Partnership is the relation between persons who have agreed to share the profits of a
business, carried on by all or any of them active for all."
PARTNERS
"The individuals who comprise a partnership are known as partners."
KINDS OF PARTNERS
Partners can be classified into different kinds, depending upon their extent of liability,
participation in management, share of profits and other facts.
1. Active Partner
A partner who takes active part in the affairs of business and its management is called active
partner. He contributes his share in the capital and is liable to pay the obligations of the firm.
2. Secret Partner
A partner who takes active part in the affairs of the business but is unknown to the public as a
partner is called secret partner. He is liable to the creditors of the firm.
3. Sleeping Partner
A partner who only contributes is the capital but does not take part in the management of the
business is known as sleeping partner. He is liable to pay the obligations of the firm.
4. Silent Partner
A partner who does not take part in the management of business but is known to the public as
partner is called silent partner. He is liable to the creditors of the firm.
5. Senior Partner
A partner who invests a large portion of capital in the business is called senior partner. He has
a prominent position in the firm due to his experience, skill, energy, age and other facts.
6. Sub-Partner
A partner in a firm can make an agreement with a stranger to share the profits earned by him
from the partnership business. A sub-partner is not liable for any debt and canot interfere in
the business matters.
7. Junior Partner
A person who has a small investment in the firm and has a limited experience of business is
called junior partner.
8. Major Partner
A major partner is a person who is over 18 years of age. A person is allowed to make contract
when he has attained the age of majority.
9. Minor Partner
A person who is minor cannot enter into a valid contract. However, he can become a partner
with the consent of all other partners. A minor can share profits of a business but not the
losses.
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Introduction to Business ­MGT 211
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10. Nominal Partner
A partner who neither contributes in capital nor does he take part in the management of the
business but allows he name to be used in the business is known as nominal partner. He is
individually and jointly liable for the debts of the firm along with other partners.
11. Deceased Partner
A partner whose life has expired is known as deceased partner. The share of capital and
profit of such partner is paid to his legal heirs in lumpsum or in installment.
12. Limited Partner
A partner whose liabilities are limited to his share in business is called limited partner. He
cannot take active part in the management of the firm.
13. Unlimited Partner
A partner whose liabilities are unlimited is known as unlimited partner. He and his personal
property both are liable to clear the debts of the firm.
14. Incoming Partner
A person who is newly admitted in the firm with the consent of all the partners is called
incoming partner. He is not liable for any act of the firm performed before he became the
partner unless he agrees.
15. Retired Partner
A partner who leaves the firm due to certain reasons is known as retired partner or outgoing
partner.  He is liable to pay all the obligations and debts of the firm incurred before his
retirement.
16. Partner for Profits only
If a partner is entitled to receive certain share of profits and is not held liable for losses is
known as partner in profits only. He is not allowed to take part in the management of the
business.
17. Quasi Partner
A person, who was the par4tner of a firm but has now retired from active participation in
business and has left his capital in the business as a loan, receiving interest on it, is known as
quasi partner.
18. Partner by Estoppels
A person who holds himself out as a partner of a firm, before a third party or allows other to do
so, though he is not a partner of that firm, is called partner by estoppels or holding out partner.
He is not entitled to any right like other partners of the firm. He is not entitled to any right like
other partners of the firm. He is personally liable to the third party for the credit given to the
firm, on the faith of his representation.
What are kinds of partnership?
KINDS OF PARTNERSHIP
There are three kinds of partnership which are described as under:
1.
Partnership at will
2.
Particular partnership
3.
Limited partnership
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Introduction to Business ­MGT 211
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PARTNERSHIP AT WILL
If the partnership is formed for an undefined time, it is called partnership at will. Any partner
can dissolve it at any time by giving the notice.
According to Partnership Act, 1932:
"If no provision is made in the agreement regarding the partnership, it is called
partnership at will."
Partnership at will may be created under the following circumstances:
1. Indefinite Period
If partnership has been formed for an indefinite period, it is called partnership at will.
2. Existence after Completion of Venture
If partnership has been formed for a particular venture and after completion such venture it
remains continue, it becomes a partnership at will.
3. Existence after Expiry of Period
If partnership has been formed for a definite time period, so after the expiry of this period, it
becomes partnership at will.
PARTICULAR PARTNERSHIP
If the partnership is formed for a particular object of temporary nature, it is called particular
partnership. On completion of a particular venture, it comes to an end. Under this no regular
business is done. For example, partnership for the construction of a building and partnership
for producing a film.
LIMITED PARTBNERSHIP
Limited partnership is that in which liabilities of some partners are limited up to the amount of
their capitals. In this partnership, there is at least one partner who has unlimited liability.
In Pakistan, this type of partnership is not formed. There is a separate partnership act for it.
MAIN FEATUTRES
Main features of partnership are:
1. Limited Partner
There is at least one partner who has limited liability.
2. Unlimited Partner
There is at least one partner who has unlimited liability.
3. Number of Partners
There are at least two partners or maximum 20 in an ordinary business and not more than 10
in banking business.
4. Admission of New Partner
New partners may be admitted in this partnership without the consent of limited partners but
with the consent of unlimited partners.
5. Registration
The registration of this partnership is compulsory by law.
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Introduction to Business ­MGT 211
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6. Transferability of Shares
Limited partner can transfer his shares to any other person with the consent of all other
partners.
7. Inspection of Books
Limited partner has a right to inspect the books of accounts.
8. Rights of Suggestions
Limited partner has a right to give suggestions to others who manage the business.
9. Participation in Management
A limited partner cannot take part in the management of the business.
10. Withdrawal of Capital
A limited partner cannot withdraw his capital until he remains in partnership business.
11. Separate Legislation
It is enrolled under the Limited Partnership Act, 1907, instead of Partnership Act, 1932.
TERMINATION OF PARTNERSHIP
All forms of partnership under Islamic law may be terminated as:
1. Notice
In all the above forms of partnership each partner has a fight to terminate the partnership by
giving notice to other partners.
2. Death
Partnership is also terminated on the death of a partner.
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Table of Contents:
  1. INTRODUCTION:CONCEPT OF BUSINESS, KINDS OF INDSTRY, TYPES OF TRADE
  2. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:THE ECONOMIC ENVIRONMENT
  3. BUSINESS ORGANIZATION:Sole Proprietorship, Joint Stock Company, Combination
  4. SOLE PROPRIETORSHIP AND ITS CHARACTERISTICS:ADVANTAGES OF SOLE PROPRIETORSHIP
  5. PARTNERSHIP AND ITS CHARACTERISTICS:ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP
  6. PARTNERSHIP (Continued):KINDS OF PARTNERS, PARTNERSHIP AT WILL
  7. PARTNERSHIP (Continued):PARTNESHIP AGREEMENT, CONCLUSION, DUTIES OF PARTNERS
  8. ORGANIZATIONAL BOUNDARIES AND ENVIRONMENTS:ETHICS IN THE WORKPLACE, SOCIAL RESPONSIBILITY
  9. JOINT STOCK COMPANY:PRIVATE COMPANY, PROMOTION STAGE, INCORPORATION STAGE
  10. LEGAL DOCUMENTS ISSUED BY A COMPANY:MEMORANDUM OF ASSOCIATION, CONTENTS OF ARTICLES
  11. WINDING UP OF COMPANY:VOLUNTARY WIDNIGN UP, KINDS OF SHARE CAPITAL
  12. COOPERATIVE SOCIETY:ADVANTAGES OF COOPERATIVE SOCIETY
  13. WHO ARE MANAGERS?:THE MANAGEMENT PROCESS, BASIC MANAGEMENT SKILLS
  14. HUMAN RESOURCE MANAGEMENT:Human Resource Planning
  15. STAFFING:STAFFING THE ORGANIZATION
  16. STAFF TRAINING & DEVELOPMENT:Typical Topics of Employee Training, Training Methods
  17. BUSINESS MANAGERíS RESPONSIBILITY PROFILE:Accountability, Specific responsibilities
  18. COMPENSATION AND BENEFITS:THE LEGAL CONTEXT OF HR MANAGEMENT, DEALING WITH ORGANIZED LABOR
  19. COMPENSATION AND BENEFITS (Continued):MOTIVATION IN THE WORKPLACE
  20. STRATEGIES FOR ENHANCING JOB SATISFACTION AND MORALE
  21. MANAGERIAL STYLES AND LEADERSHIP:Changing Patterns of Leadership
  22. MARKETING:What Is Marketing?, Marketing: Providing Value and Satisfaction
  23. THE MARKETING ENVIRONMENT:THE MARKETING MIX, Product differentiation
  24. MARKET RESEARCH:Market information, Market Segmentation, Market Trends
  25. MARKET RESEARCH PROCESS:Select the research design, Collecting and analyzing data
  26. MARKETING RESEARCH:Data Warehousing and Data Mining
  27. LEARNING EXPERIENCES OF STUDENTS EARNING LOWER LEVEL CREDIT:Discussion Topics, Market Segmentation
  28. UNDERSTANDING CONSUMER BEHAVIOR:The Consumer Buying Process
  29. THE DISTRIBUTION MIX:Intermediaries and Distribution Channels, Distribution of Business Products
  30. PHYSICAL DISTRIBUTION:Transportation Operations, Distribution as a Marketing Strategy
  31. PROMOTION:Information and Exchange Values, Promotional Strategies
  32. ADVERTISING PROMOTION:Advertising Strategies, Advertising Media
  33. PERSONAL SELLING:Personal Selling Situations, The Personal Selling Process
  34. SALES PROMOTIONS:Publicity and Public Relations, Promotional Practices in Small Business
  35. THE PRODUCTIVITY:Responding to the Productivity Challenge, Domestic Productivity
  36. THE PLANNING PROCESS:Strengths, Weaknesses, Threats
  37. TOTAL QUALITY MANAGEMENT:Planning for Quality, Controlling for Quality
  38. TOTAL QUALITY MANAGEMENT (continued):Tools for Total Quality Management
  39. TOTAL QUALITY MANAGEMENT (continued):Process Re-engineering, Emphasizing Quality of Work Life
  40. BUSINESS IN DIGITAL AGE:Types of Information Systems, Telecommunications and Networks
  41. NON-VERBAL COMMUNICATION MODES:Body Movement, Facial Expressions
  42. BUSINESS ORGANIZATIONS:Organization as a System
  43. ACCOUNTING:Accounting Information System, Financial versus Managerial Accounting
  44. TOOLS OF THE ACCOUNTING TRADE:Double-Entry Accounting, Assets
  45. FINANCIAL MANAGEMENT:The Role of the Financial Manager, Short-Term (Operating) Expenditures