PARTNERSHIP
Concept of Partnership
Necessity is the mother of invention. This applies to partnership also. Limitations of sole proprietorship gave birth to the partnership. Prof. M. Naughton has rightly put advantage of the complementary abilities of partners. First of all, this form of business organization came into existence in Rome and thereafter spread worldwide. With the development of the scale of business, its forms were also changed. The following factors are responsible for the existence and growth of partnership - or "Businessmen establish a partnership to raise more capital and take
(1) Need for huge capital for establishing and running a large-scale business efficiently.
(2) For managing the large-scale business efficiently with the help of other able persons.
(3) For facing the business rivalry and competition.
(4) For taking advantage of division of labor.
(5) For taking advantage of specialization.
(6) For diffusing business risk.
(7) For obtaining technical knowledge in the case of mechanized production.
(8) For removing the shortcomings of sole tradership.
Meaning of Partnership
When two or more persons combine or associate establishing and running a lawful business to share capital, diffusing risk, and availing of the different abilities, it is known as partnership. In this form of business organization, large capital is arranged, joint control and supervision are exercised, division of labor and specialization is adopted, and the profits or losses are shared in a pre-determined ratio. In other words, the partnership is a pooling of financial, managerial, and technological resources for achieving the best results in a business undertaking.
Definition of Partnership
The partnership has been defined by various authors as under-.
1. H.L. Haney- "The partnership may be defined relations existing between persons who agree to camy on business in common with a view to private gain."
2. Kimball and Kimball- "A partnership firm, as it is often called, is that group of men who have joined capital or services for the prosecution of some enterprise. "
3. W.S. Spriegel- "Partnership has two or more members each of whom is responsíble for the firm, each of the partners may bind others for debts of the partnership. "
4. Section 4 of the Indian Partnership Act, 1932- "Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all."
5.UniformPartnershipAct, USA-"Partnership is an association of two or more persons to carry on as co-owners of a business of profit. " Thus, Partnership is known as a voluntary association of two or more persons who agree to run a particular business and share its profits and losses in pre-determined proportion. The management of such business may be done by all of them or act for all.
Characteristics or Salient Features
The following characteristics of partnership emerge from the above definitions-
1. Two or more persons- In a partnership, there must be atleast two persons to form it and at the most fifty persons. All of them must be competent to contract. As per the Indian Contract Act, 1872, every person except the following is competent to contract- (a) Minor, (b) Persons of unsound mind, and (c) persons disqualified by any law. Section 464 of the Companies Act, 2013 empowers the Central Government to prescribe the maximum number of partners in a firm, but the number of prescribed persons cannot be more than 100 (One hundred). The Central Government has prescribed a maximum number of partners in a firm to be 50 (Fifty) vide Rule 10 of the Companies (Miscellaneous) Rules, 2014. Thus, in effect, a partnership firm cannot have more than 50 members.
2. An Agreement- Partnership is created by an agreement and not by status. The agreement may be expressed or implied, but an express (written) agreement is always desirable to avoid disputes in the future.
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