Partnership

Lecture 7

Partnershipisthesecondstageintheevolutionof
formsofbusinessorganization.Itmeans
theassociationoftwoormorepersonstocarryo
nascoowners, i.e.abusinessforprofit.
The persons who constitute this organization
are individually termed as partners and
collectivelyknownasfirm;andthenameunder
whichtheirbusiness isconducted iscalled
TheFirmName.

 Partnershipistherelationbetweenpersons
whohaveagreedtosharetheprofitsofa
businesscarriedonbyalloranyofthemacti
ng forall.
Acontractoftwoormorecompetentperson
stoplacetheirmoney,efforts,labour
andskills,someorallofthem,inalawful
commerceorbusinessandtodividethe
profitsandbearthelossesincertainproportio
n.

The Partnership act 1932

An Actto define and amend the law
relating topartnership.
It extends to the whole of Pakistan.
It received the assent of the GovernorGeneral on 8 April 1932 and came into
force on 1 October 1932.
Before the enactment of this act,
partnerships were governed by the
provisions of theIndian Contract Act, 1872.

 According to section 4 of the

Partnership Act of 1932, "Partnership
is defined as the relation between
two or more persons who have
agreed to share the profits of a
business carried on by all or any one
of them acting for all.

Number of partners
In ordinary business the number of
partners should not exceed 20.
In case of banking business the
number of partners should not
exceed 10.

Application for registration

The registration of a firm may be effected at any time by sending by
post or delivering to the Registrar of area in which any place of
business of the firm is situated or proposed to be situated, a
statement in the prescribed form and accompanied by the prescribed
fee, stating (a) the firm name,
(b) the place or principal place of business of the firm,
(c) the names of any other places where the firm carries on business,
(d) the date when each partner joined the firm,
(e) the names in full and permanent addresses of the partners, and,
(f) duration of the firm.
The statement shall be signed by all the partners, or by their agents
specially authorized in this behalf.
District Registrar is Registrar of Firms in his District is the authority to
register partnership firm.

Types of partnerships
Partnership Act, 1932 provides differenttypes of
partnership
Partnership at-will
Partnership at-will is a partnership where no provision is
made by contract between the partners for the duration of
their partnership. It is a partnership for indefinite period
but can be dissolve after giving notices to all the partners.
Particular partnership: Particular Partnership is a
partnership where a person may become a partner with
another person in particular adventures or undertakings
for a specified period. Particular partnership will be
dissolved on the completion of particular business or
undertaking.

What is a partnership deed?

Partnership deed or agreement is a
document in which mutual rights and
obligations of all the partners and
conditions relating to partnership and
the regulations governing its internal
management and organizations are
documented, the said deed should
be signed by all the partners.

Characteristics
Agreement:
Agreementisnecessaryforpartnership.
Partnershipagreementmaybewrittenoror
al.Itisbetterthattheagreementisinwritte
n formtosettlethedisputes.
Business activity:
Partnershipisabusinessunitandabusiness
isalwaysforprofit.Itmustnotincludeclub
or
charitabletrusts,setupforwelfare.

 Cooperation:
Inpartnershipmutualcooperationandmutu
al confidenceisanimportantfactor.
Partnershipcannottakeplacewithout
cooperation.
Dissolution:
Itisdissolvedifapartnerleaves,diesord
eclaredbankrupt.
Dissolution of partnership
Dissolution of firm

 Legal entity:
Ifpartnershipisnotregistered,ithasnolegal
entity.Moreover,partnershiphasno
separatelegalentityfromitsmembersand
viceversa.
Management:
Inpartnershipallthepartnerscantakepartor
participateintheactivitiesofbusiness
management.Sometimes,onlyafewpersons
areallowed tomanagethebusinessaffairs.

 Number of partners:
Inpartnershipthereshouldbeatleas
ttwo
partners.Butinordinarybusinessth
e
partners must not exceed
20 and in case of banking business it
should not exceed 10.
Profit and loss distribution: the
distribution of profit and loss among
the partners is done according to

 Share in capital:
Accordingtotheagreement,everypartner
contributeshisshareofcapital.Somepartners
provideonlyskillsandabilitytobecomea
partnerofbusinessandearnprofit.
Transfer of rights:
Inpartnershipnopartnercantransferhis
sharesorrightstoanotherperson,withoutthe
consentofallpartners.

 Unlimited liability:
Inpartnershiptheliabilityofeachpar
tneris
unlimited.Incaseofloss,theprivate
propertyofthepartnersisalsoused
uptopaythe
businessdebts.