Table of Contents
What is Partnership
Partnership Act 1890 is UK act. which describes the rules and regulation from creating, operating and dissolution of business through partnership way. Its also simple and most common form of business as like sole proprietorship. Easy to form and run business by fulfilling the basic requirements.
Definition of partnership.
As per UK gov,
(1) Partnership is the relation which subsists between persons carrying on a business in common with a view of profit.
(2)But the relation between members of any company or association which is—
[F1(a)registered under the Companies Act 2006, or]
(b)Formed or incorporated by or in pursuance of any other Act of Parliament or letters patent, or Royal Charter; F2. . . F2. . . is not a partnership within the meaning of this Act.
“Their relationship come into existence between two or more than two people for doing business with the only objective of earning the profit. In simple when two or more than two people become joint owner of the business with the agreed ratio of profit and loss is call partnership”.
There should be at least two members and maximum limit is twenty. In case of death of others partners resulted in remaining one partner, then it will be converted into Sole trader ship. Partnership should be made for business as per business definition. As per law, every partner is responsible for the acts of business as per partnership agreement. That every partner in case of loss or incident should be paid as per ratio agreed.
What are the Characteristics of Partnership
- Formation: One of the main Character which attracts the people in doing business is easy to formation. It can be even formed in oral. But however it is recommended it should be at least in written form to for resolving the UN-expected dispute.
- Registration is not necessary by law, but for getting customers and other people trust. It can be registered with mutual consent by following the rules and regulation of Governing authority with partnership deed.
- Profit and loss sharing should be agreed at the start of the partnership. Every partner will get share as per agreement.
- Finance must be invest by every partner. In some cases, skilled person invest his skills instead of finance, but with mutual consent of other partners. Forgetting goodwill, legend or famous person having followers can be a partner without capital with the agreed ratio of profit.
- Goal will be only to earn profit and get shares. Doing work for charity or establishing to any organization without profit motive will be business, so will not partnership business.
- Number of Persons should be at least two and maximum twenty. Other legislation may have their own rules and regulations for numbers, like in banking sector partners should not be more than 10.
- Liability of the partners are unlimited, like characteristics of sole trader ship. If the loss not covered even by selling the whole business, then personal property of the also used for clearing the debts.
- Rights and duties are the same for every partner. They can participate in decision making, inspections, usage of firm assets for business use.
- Separate Legal Entity comes after the registration of firm. After registration, any partner may leave partnership or new partner appointed. in case of non-registration, there is no legal entity, with retirement or appointment of a new partner existing partnership will be dissolved and new come into existence.