Introduction
Partnership is the 2nd level of business organization. When two or more persons carry on a legal business for the purpose of making profit, it is called a partnership.
Partnership Act 1932
A relationship between a person who has agreed to share in the profits of a business carried on by all or one of them acting for all.
US federal law
An association of two or more persons for the purpose of operating as co-owners of a business for profit.
Elements of partnership
A partnership is a relationship between certain persons.
Who made the deal.
To do business for profit.
The business must be run by one or any of the persons concerned, acting for all.
MAIN CHARACTERISTICS OF THE PARTNERSHIP
Agreement
Partnership business is established by agreement. Without an agreement, partnership is not possible. The agreement can be written or oral. It does not result from status, operation of law or inheritance.
Entity
This enterprise has no separate legal entity apart from its members. The rights and obligations of the partnership are deemed to be the rights and obligations of the partners.
Number of persons
There is a minimum of two and a maximum of 20 partners in the company. The Companies Act does not state any limit on the maximum number of persons, but under Section 14 of the Companies Ordinance 1984.
Capital
In general, capital is contributed by all partners according to the agreement. It is not necessary for each partner to contribute the same amount of capital. Sometimes a person becomes a partner without investment of capital only on the basis of their skill and experience.
Formation
Two or more persons can form a partnership. This means that a single person cannot form a partnership.
Responsibility
The liability of each partner is unlimited, which means that if the available resources of the business are not sufficient to cover the losses or to pay the debts, the private partners are also liable to pay the business debts or losses.
Balanced decisions
Decisions in this business are made based on the mutual consent of all partners. So the decisions are quite balanced.
Permanent credit
A partnership firm has the highest credit options because the private property of the partners is also responsible for business debts.
Combined management skill
It is true that two minds are better than one. Since there are many partners, they have managerial skills that are beneficial to the partnership.
Classification of partners
Partners can be divided into different types, such as active partner, sleeping partner, younger partner and older partner.
Dissolution
Affiliate business can be easily canceled. Death, insolvency or any other unfortunate event can dissolve the partnership.
Business
The business of a partnership is carried on by all the partners, or any one of them acts for all of them. But every partner can participate in the management of the company by law.
Duration
The partnership is usually open-ended. Although, certain partnerships are also formed to complete a specific venture.
Act
Since there are no strict rules and regulations in this kind of business, this business is run freely.
Flexibility
A business or partnership is flexible compared to a company. In case of emergency, it can be changed after mutual consent of the partners.
Investment
In a company, each partner contributes his share of the capital according to the contract. Some persons may become partners without capital, but in lieu of capital they invest their time, energy, experience and ability in the business, and may also make a profit.
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