8/10/2019 Notes Partnership Essentials
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LAW OF PARTNERSHIP
Sl.
No.
Partnership Joint Stock Compan
1. Minimum number is 2 and maximumnumber is 10 in banking
business and 20in any other business.
Minimum 2 in private company and7 in public company but
maximumnumber is 50 in private company
but no limit in public company.
2. It arises out of an agreement. It is created by procedure of
la.
!. It is not a legal entity. "ompany is a legal entity.
#. $artners are personally liable for the
losses of the firm.
%hare&holders are not liable for the
losses in a company.
5. 'egistration is not mandatory except in
the state of Maharashtra.
'egistration is compulsory.
(. $artners are )ointly the oners of the
property of the firm.
$roperty of the company is not the
property of the shareholders.
7. It may be dissolved by agreement beteen
the partners.
It is ound up through legal
procedure.
*. +ll the partners are entitled to take part in
the management of the firm.
%hare&holders do not take part in the
management.
,. -very partner is an agent of the other
partners and of the firm.
+ member is not an agent of the
other members or of the company.
is actions do not bind either.
10. + share in a partnership cannot be
transferred ithout the consent of all the
partners.
+ shareholder may transfer his
shares sub)ect to the provisions
contained in the +rticles. In the caseof $ublic /imited
"ompanies the
shares of hich are uoted in the
stock exchange the transfer isusually restricted.
11. he profits of the firm must be distributed
among the partners according to the termsof the partnership
deed.
3o such compulsion to distribute its
profits among its members. %omeportion of the profits become
distributable among the
shareholders only hen dividendsare declared.
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'. Association o" t(o or more persons #
+t least to persons should )oin together to constitute a
partnership. $ersons
ho have entered into partnership ith one another are
individually ?partners.
"ollectively they are called firm. + firm is distinct from its
members but is not an entityunder the Indian $artnership +ct though
under the Income ax +ct it has an independent
separate tax legal entity. he name under hich their business is
carried on is called the
?firm name. $ersons ay carry on business under any name and
style they may choose toadopt provided that it is not
misleading.
). A*reement #$
he second important characteristic to determine the existence of
partnership is there
must be an agreement entered into by all the persons ho come
together to form a
partnership. he agreement may be express or implied.
+. ,-siness #$
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Test o" partnership
1-t-al A*enc #$
he true test of partnership is mutual agency rather than sharing
of profits. If this
element of mutual agency is absent then there ill be no
partnership. he primafacie evidence of partnership is mutual
agency. -very partner carrying on the business
is the principal as ell as the agent of the other partners. %o
the act of one partner
done on behalf of the firm binds all partners. %ection # of the
Indian $artnership +ct1,!2 says is the relation beteen persons ho
have agreed to share profits of the
business carried on by all or any of them acting for all. hus an
implied agency flos
from their relationship as partners ith the result that every
person ho conducts the
business of the firm is in doing so deemed in la to be the agent
of all the partners.%ection 1*9
