Partnership

Disadvantages of Partnership

Unlimited Liability

Partners will have to pay all the debts of the business even from their personal

property.

Shorter Life

Partnership ends when one of the partners dies or becomes insane

Limited Capital

Partners run the business from their own capital. Sometimes, that capital becomes

limited to meet the requirements of the business.

Lack of interest

Profit is divided among the partners. So, partners do not take keen interest in the

business.

Slow Decision Making

Partners might have different point of view regarding a particular matter. So, decision

making is relatively slow.

It is difficult to transfer the rights of partnership.

There is always a chance of conflict.

Types of Partners

Active Partner is one who participates in all the affairs of the business.

Secret Partner is one who has invested in the business but he/she is not known to

general public.

Sleeping Partner is one who is not very active in the affairs of the business.

Senior Partner is one who has invested the maximum amount in the business.

Junior Partner is one who has invested the minimum amount in the business.

Types of Partnership

Partnership at will

Life of the partnership depends upon the will of the partners.

Limited Partnership

That business in which at least one partner has the limited liability.

Investor is liable to the amount; he/she has invested in the business only. This is

called Limited Liability

There will be at least one partner who has the unlimited liability.

Particular Partnership

Partnership formed for a particular purpose.

It is dissolved automatically at the achievement of the purpose.

Termination of Partnership

By Notice

A partner can terminate partnership by giving notice to other partners due to any

reason.

Upon Death

Partnership will automatically be terminated at the death of any partner.

Partnership Deed

A document that contains the terms and conditions of the business.

Contents of Partnership Deed

Date on which the agreement was made.

Name of the business.

Nature of the business.

This clause will cover the scope of the business.

Names, addresses, telephone Numbers and emails of the partners.

Capital of the business.

If duration is attached with any business that should clearly be mentioned in the

partnership deed.

Duties of the partners.

Whether any partner is entitled to salary. If yes, how much amount should be given

to him as salary.

Profit distribution ratio.

Whether partners are entitled to withdraw money from the business. If yes,

procedure of withdrawals should also be written in the partnership deed.

Arbitration

In case of a conflict, how that conflict would be resolved before going to the court.

The partner should read the partnership deed carefully, add as much clauses as

possible and never take anything for granted.

Rights of the partners

Every partner has the right to:

Participate in all the affairs of the business.

Get his/her share of profit from the business.

Leave the partnership according to the terms and conditions of the partnership

deed.

Claim the salary against his/her services.

Participate in the management of the business