PARTNERSHIP FIRM Rights of Partners Every partner has right- 1.to take part in the conduct and management of the firm’s business. 2. to express opinion. 3. To inspect and copy books of account and records of the firm. 4.To get an equal share in the profit 5.To receive interest on loans and advances made by him to the firm. 6.To be indemnified for the expenses incurred and losses sustained. 7.To continue in the firm unless expelled 8.to retire in accordance with terms of the partnership agreement. IMPLIED AUTHORITY OF PARTNER To buy and sell goods on behalf of the firm. To borrow money on behalf of the firm and where necessary ,to pledge the stock-in-trade for this purpose. To receive payments on behalf of the firm and issue valid receipts for the amount so received. To draw cheques, accept, make and endorse bills of exchange, promissory notes etc. on behalf of the firm. To employ persons of carrying out the firm’s business. FORMATION OF PARTNERSHIP -Partnership through an agreement –oral or written among two or more persons. -All terms and conditions of partnership must be in writing. -A written agreement is referred to as the PARTNERSHIP DEED or ARTICLES OF PARTNERSHIP. Partnership deed must be stamped properly and each partner should be given copy of deed. Partnership deed is NOT a public document. It can be altered with the mutual consent of all the partners. Contents of the partnership deed Name of the firm Names and addresses of all the partners Nature of the firm’s business Date of the agreement Principal place of the firm’s business Duration of partnership, if any. Amount of capital contributed by each partner Contents of partnership deed (contd.) Proportion in which the profits and losses are to be shared. Loans and advances by partners by partners and interest payable on them. Amount of withdrawal allowed to each partner and the rate of interest. Amount of salary or commission payable to any partner. Duties, powers and obligations of all the partners. contents contd. Maintenance of account and audit. Mode of valuation of goodwill on admission, retirement or death of a partner. Procedure for dissolution of the firm and settlement of accounts. Arbitration for settlement of disputes among the partners. Arrangements in case, a partner becomes insolvent. Any other clause(s),specific to the business. Registration of the Firm Registration of firm under The Partnership Act,1932 by the Registrar of Firms appointed by the Govt. Though registration of partnership firm not compulsory, unregistered firm suffers from certain disabilities. Registration of firm is thus desirable. PROCEDURE FOR REGISTRATION A partnership firm can be registered at ANY TIME by filing a statement in the prescribed form. The form should be duly signed by all the partners. Should be submitted to Registrar of firms along with prescribed fee. Information contained in Statement for Registration Name of the Firm Principal place of its business Name of other places where firm is carrying on business Names and permanent addresses of all partners Date of commencement of firm’s business and the date of joining of firm by each partner Duration of the firm, if any. Nature of the firm’s business. On receipt of statement and the fees, Registrar makes an entry in the Register of Firms. The firm is then considered to be registered. The Registrar then issues a Certificate of Registration. Dissolution of Firm Dissolution of firm follows dissolution of partnership i.e.all partners are dissolved by termination of original partnership agreement or change of contractual relationship among partners. A partnership is dissolved by insolvency, retirement, incapacity, death, expulsion of a partner or on expiry/completion of the term/venture of partnership. MERITS OF PARTNERSHIP Ease of formation Larger financial resources,if big no. of partners Specialisation and balanced approach Flexibility of operations Protection of minority of interest. Personal incentive and supervision. Capacity for survival Better human and public relations Business secrecy Demerits of partnership Unlimited liability Limited resources-partners cant be more than 10 in banking business and 20 in other type of business. Risk of implied agency (an incompetent/dishonest partner can bring /imply disaster for whole firm) Lack of harmony/mutual understanding may affect good decision making in such firms. Non-transferability of capital outside without consent of other partners Normally ,public imposes distrust in partnerhips.
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