ZeePedia Add to Favourites   |   Contact us


Introduction to Business

<<< Previous PARTNERSHIP (Continued):PARTNESHIP AGREEMENT, CONCLUSION, DUTIES OF PARTNERS Next >>>
 
img
Introduction to Business ­MGT 211
VU
Lesson 7
PARTNERSHIP (Continued)
What is Partnership Agreement? Discuss important points of this document. Discuss its
contents.
PARTNESHIP AGREEMENT
Partnership deed or agreement is a document in which the relations of partners with one
another are clearly written. It is the most important document of partnership, which includes
the terms and conditions related to partnership and the regulations governing its internal
management and organization. It may be oral or written. But it is necessary to have the
agreement in writing.
DEFINITION
"Partnership deed or agreement is a document which includes the terms and
conditions related to the partnership; and regulations governing its internal management and
organization."
PROVISIONS
Following are the important provisions of partnership deed:
1. Date
Date of starting the business should be written in it.
2. Name of the Business
Name of the firm under which the business is to be conducted should be written in it.
3. Nature of Business
Nature of business to be conducted by the partners should be mentioned.
4. Location of Business
Location of business, i.e. where it is to be operated, should be written in it.
5. List of Partners
List of partners, their names, addresses and other particulars should be mentioned.
6. Duration of partnership
Duration of partnership, whether it is for a definite period of time or indefinite period of time,
should be written.
7. Dealing Bank
The name of dealing bank should be written in it.
8. Division of Work
Division of work among the partners, for the management of the firm, should be written clearly
in it.
9. Deficiency of Capital
How the deficiency of capital should be covered at the time of insolvency of any partner must
be clearly stated.
10. Total Capital
Total capital of the firm and share of each partner in the capital should be mentioned in it.
32
img
Introduction to Business ­MGT 211
VU
11. Additional Capital
How further capital, if necessary, should be introduced; must be mentioned in it.
12. Amount of Drawings
The amount, which each partner would be allowed to withdraw, in anticipation of profit, should
be clearly stated.
13. Amount of Salary
The amount of salaries payable to the partners should be written in it.
14. Amount of Profit
The fixation of the amount of profit payable to any partner, other than the salary, should be
mentioned in it.
15. Arbitration
In case of dispute, provisions for arbitration should also be available.
16. Rules of Admission and Retirement
Rules regarding admission and retirement of partners should be clearly written.
17. Period of Accounts
Period, after which final accounts are to be prepared, should be written in it.
18. Rights and Duties of Partners
There should also be the provisions of rights and duties of each partner.
19. Witness
The witness of agreement provisions should be mentioned.
20. Ways of Dissolution
The ways, under which the firm may be dissolved, should also be written in it.
CONCLUSION
The above mentioned points are not included in the final list of the clauses. Any clause, which
is mutually agreed to be accepted by the partners, can be included in the agreement. If the
deed is silent on any point, then provisions of Partnership Act, 1932, should be applied.
What are the rights, duties and liabilities of a partner in the absence of partnership
agreement?
INTRODUCTION
A partnership agreement may contain special provisions regarding the rights, duties and
liabilities of the partners. But in the absence of such an agreement the rules laid down in the
Partnership Act, 1932, are applicable.
What is Partnership Deed?
"Partnership deed or agreement is a document which includes the terms and
conditions related to the partnership; and regulations governing its internal management and
organization."
RIGHSTS OF PARTNERS
Section 123 and 13 of Partnership Act, 1932, describe the following rights of the partners:
33
img
Introduction to Business ­MGT 211
VU
1. Rights of Participation
Every partner has a right to take part in the conduct of the business.
2. Right of share in Profits
All the partners are entitled to share the profits of the firm equally.
3. Right to Exercise Power
To protect the firm from loss, every partner has a right to use his power.
4. Right of Existence
A partner cannot be expelled by any other partner from the business. Every partner has a
right to live in the business.
5. Right of Retirement
Every partner has a right to retire from the firm after serving a notice.
6. Right of Inspection
Every partner has a right to check the accounts of the business.
7. Right of Salary
A partner has a right to demand for the salary, for performing his duties in the management of
the business.
8. Indemnify the Expense
A partner has a right to be indemnified by the firm, in respect of any payment made by him in
the ordinary course of business, or in an emergency, for the purposes of protecting the firm
from loss.
9. Issue of Receipt
A partner has a right to collect the debts of the firm and to issue the receipts.
10. Interest on Capital
If a partner make any advance in addition to the amount of his capital, he will be entitled to
receive interest at the rate of 6% per annum.
11. Participation in the Management
A partner has a right to participate in the management of the firm.
12. Right to Use the Property
Every partner has an equal right to use the firm's property exclusively the purpose of
partnership.
13. Right to Act as an Agent
Every partner has a right to act as an agent on behalf of the remaining partners.
DUTIES OF PARTNERS
According to section 9 of Partnership Act, 1932, the general duties of the partners are as
follows:
"Partners are bound to carry on the business of the firm to the greatest common
advantage, to be just and faithful to each other and to render true accounts, and to
provide full information about the things affecting the firm, to any other partner or to
their legal representatives."
34
img
Introduction to Business ­MGT 211
VU
1. Utmost Good Faith
Every partner is bound to give true and full information under the principle of "utmost good
faith". All the partners should be just and faithful to one another.
2. Maximum Common Benefit
It is the duty of the partners to work for the maximum common benefit.
3. Maintenance of True Accounts
Every partner should prepare the true account of the firm for other partners.
4. Use of Powers within Limit
It is the duty of the partner that he should use his powers within the limits, delegated by the
firm.
5. Use of Property
It is the duty of a partner that he must not use the property of the firm for his personal interest
or benefit.
6. Provide all Information
It is the duty of the partner that he must provide all the necessary information about the
business to other partners.
7. Profit should be paid to the Firms
If a partner earns profit through any source of the firm. It should be paid to the management of
the firm.
8. Distribution of Loss
In the absence of agreement, each partner should pay the loss equally.
9. Compensation of Loss
If a partner commits a fraud with his co-partners, he must compensate the loss.
10. To be Sincere and Careful
Every partner must be sincere, careful and faithful to other partners. He should discharge his
duties very fairly.
11. To Maintain the Secrecy of the Firm
It is the duty of a partner that he should maintain the secrecy of the business from outsiders.
12. To Abide by the Decisions
A partner should abide by the decisions made by the majority of the partners.
13. Not to Enter into a Private Agreement
A partner must not enter into private agreement with a customer of the firm. If he does so, it is
his duty to share his profit with his co-partners.
14. Not to Use the Firm's Name
A partner is not allowed to use the firm's name and property for the satisfaction of his personal
need. If he does so and gets profit out of it, he must share it with his co-partner.
LIABILITIES OF PARTNERS
Generally, the liability of a partner is unlimited. Thus, each partner is liable not only to the
extent of his share in partnership, but his personal property is also used up to clear the debts
unless the proves that his liability is limited to the extent of his share in the assets of the firm.
35
img
Introduction to Business ­MGT 211
VU
According to section 13 (c) of Partnership Act, 1932, subject to contract between the
partners, the liabilities of a partner are as follows:
1. Joint liabilities of Partners for all Debts
Every partner is liable, jointly with all other partners for all acts and debts of the firm.
2. Liability of New Partner
A new partner is liable for all the acts of a firm, which are performed after he becomes a
partner.
3. Liability of Retired Partner
A retired partner is not responsible for any act of the firm after the date of his retirement.
4. Liability of Deceased Partner
If a partner dies and the firm suffers losses, then the property of the deceased partner cannot
be held liable for any payment.
5. Liability of an Expelled Partner
An expelled partner is not liable to suffer the losses and pay the debts of the firm, which arise
after his expulsion from the firm.
6. Liability of Fraud
If any partner commits a fraud, then partners are also equally liable with him, for it.
7. Liability of Insolvent Partner
The firm is not liable for any transaction of the insolvent partner, after the date of his
insolvency is declared by the court.
8. Liability due to Willful Negligence
A partner is liable to make good the losses, arising due to his willful negligence.
9. Share in Loss
In case of loss, all the partners will have to bear the loss equally.
10. No Private use of Property
A partner cannot use the property of the firm or its goodwill for his private gains. If he does so,
he is liable to surrender the profits, so earned, to the firm.
DISSOLUTION OF FIRM
According to Section 39 of Partnership Act, 1932:
"The dissolution of partnership among all the partners of firm is called dissolution of
firm."
Explanation
It means that dissolution of firm includes the dissolution of partnership. But when partnership
is dissolved, firm may or may not be dissolved; because business may be conducted by the
surviving partners on the retirement, death or insolvency of any partner.
MODES OF DISSOLUTION OF FIRM
According to partnership Act, 1932, the dissolution of firm may take place through following
ways:
36
img
Introduction to Business ­MGT 211
VU
1.
Dissolution by Agreement
2.
Dissolution by Notice
3.
Compulsory Dissolution
4.
Contingent Dissolution
5.
Dissolution by Court
DISSOLUTION BY AGREEMENT
A firm may be dissolved with the consent of all the partners or in accordance with the contract
made between the partners.
DISSOLUTION BY NOTICE
In case of partnership at will, the firm may be dissolved by any partner, serving a notice in
writing, of 14 days, to all the other partners of his intention to dissolve the firm. The firm is
dissolved as from the date mentioned in the notice.
COMPULSORY DISSOLUTION
Following are the causes of compulsory dissolution of firm:
1. Insolvency
Insolvency of all the partners or any one partner may become the cause of compulsory
dissolution.
2. Unlawful Business
The firm is dissolved if its business becomes unlawful.
CONTINGENT DISSOLUTION
A partnership firm may be dissolved due to the following reasons:
1. Expiry of Period
If a firm is established for a fixed period, then it will be dissolved after the expiry of period.
2. Completion of Particular Venture
A firm may be dissolved after the completion of particular venture, for which it is formed:
3. Death of a Partner
A partnership firm may also dissolve with the death of a partner.
4. Insolvency
Insolvency of a partner also serves as a notice for dissolution of firm.
DISSOLUTION BY COURT
The court may dissolve a firm due to the following reasons:
1. Case of Unsound Mind
A partnership firm may be dissolved by the order of court, if any partner becomes of unsound
mind.
2. Case of Incapable Partner
A partnership firm may be dissolved by the order of court if any partner permanently become
incapable of performing his duties.
37
img
Introduction to Business ­MGT 211
VU
3. Case of Misconduct
A partnership firm may be dissolved if a partner is found guilty of misconduct in affairs of
business.
4. Transfer of Interest
A partnership firm may be dissolved if any partner transfers his share of interest to other
persons, without the consent of existing partners.
5. Breach of Agreement
A partnership firm may be dissolved if any partner commits a breach of agreement.
6. Assurance of Loss
Court may dissolve a partnership firm if the business of that firm is suffering from continuous
loss.
7. Others Reasons
The court has the right to accept or reject the application of dissolution. The just and equitable
reason is determined by the court.
38
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