1. Partnership Act 1932

2. Forms of business Sole transaction (one man business, no sharing of liability, no formalities involved)) Partnership (based on agreement between the parties, less formalities involved, good for small business, liability unlimited) Company business( Limited liability, formalities involved, good for big/large scale business, corporate personality.)

3. Partnership A partnership is “an association of 2 or more persons to carry on, as co-owners, a business for profit.” Each partner is a co-owner. Partners have joint control over the business’s operations and the right to share in its profits. A partnership is considered a “general partnership” unless specifically designated as a “limited partnership

4. Definition Section 4 of the partnership act 1932, _ “Partnership is the relationship between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.” “Persons who have entered into partnership with one another are individually called ‘partners’ and collectively firm-and the name under which the firm is carried on is called the ‘firm name’.”

5. Partnership Law Agency concepts found in partnership law: – Each partner is an agent of the partnership for the purpose of conducting the partnership's business. – Partners have liability for the acts of other partners that occur in the course of conducting partnership business. – Each partner is a fiduciary of the other partners.

6. Partnership Law The existence of a partnership is an inference of law based on established facts, but no factor alone is determinative. Factors a court would use in determining whether a partnership exists: – Profit sharing (creates presumption of a partnership) – Joint ownership of business (but not just joint ownership of property) – Right to manage the business

7. Partnership Law Duration of partnership: Partnership for a term or Partnership at will. A “joint venture” is a partnership formed for a specific purpose (e.g. to buy land and develop a retail shopping center). No express agreement is required for a partnership to exist. Partnership agreements can be oral, but it is advisable to put an agreement into writing. Each partner make a “capital contribution” in exchange for his “partnership interest” (expressed as a %). – Contributions may be in the form of cash, time/talent, or property; additional contributions may be required by the partnership agreement.

8. Kinds of Partners Active or Actual Partner: A person who takes active part, in the affairs and management of the business is called active partner. He contributes his shares in the capital and is also liable to pay the obligations of firm. Sleeping Partner: those who merely put in their capital and do not take active participation. A person who (a) does not conduct the management of the firm personally (b) is not known to the outsiders as a partner of the firm, is called sleeping partner. But he invests his amount in the business and is liable to clear the debts of the firm. He is also called dormant partner. Silent partner: He is that kind of partner who does not participate in the affairs of the business but is known to outsiders as a partner of the firm. He is liable to pay the debts of the firm like other partner. does not have any voice in the management.

9. Partners in profits only: He is an individual who gets a share of the profits only without being liable for the losses. He does not participate in the management of the business. He will be liable to outsiders for all acts of the firm. Sub partner: a person with whom one partner agrees to share his portion of profit. No right & liability The person who receives a share of profit from one of the regular partners is called the Sub-Partner. He is not liable to pay the debt is of the firm. He has no rights and privileges against the firm. Limited partner who has not to pay any obligation more than the share he holds in the firm is liable only up to the value of his capital contributions in the firm, and the like.

10. Minor Partner: There is no restriction to join the minor in the partnership by law. Although he may become partner but with the consent of all existing partners. In this case, he can be admitted to the profits of the firm only but not losses. He is not personally liable for the obligations of the firm. But minor has the right to inspect and copy.the accounts of the firm. Within six months of his attaining maturity, he has to give public notice whether he wants to remain partner or not. After his decision, he will deemed as full fledged partner.

11. Kinds of Partners Partner by estoppel or holding out: a person who represents himself as a partner of a firm to third parties though he is not a partner. On such representation he becomes liable to third parties if it can be proved that the third party acted on the faith of his representation. It is irrelevant whether the person representing knows of such faith or not. Nominal Partner : He is not in reality a partner of firm but his name is used as if he is a member of the firm. He is not entitled in the profit or loss of the business but he is liable to all the acts of the firm. The person who has good prestige and status is given, the position of nominal partner.

12. Rights of the partners In the absence of a partnership agreement (oral or written) The Partnership Act govern the partners’ rights. These default rules include: –Management of partnership: each partner has an equal voice in management. One vote each--majority wins; unanimous consent required for some actions. –Partnership income/losses: equal profits, losses shared as profits shared. –Compensation: none. –Inspection of the books and records. –A partner can demand an accounting of partnership assets or profits to determine value of each partner’s share. May occur when other partner(s) suspected of committing fraud or embezzlement, or any time it is just and reasonable.

13. Duties and Liabilities Fiduciary duties. Partners are fiduciaries and general agents of one another and the partnership. Fiduciary duties include “duty of care” and “duty of loyalty.” General agency powers. All partners have implied authority to conduct ordinary partnership business (but may need unanimous consent to sell assets, enter into debt agreements, or certain other activities). Duty to make contributions to cover losses.

14. Liabilities All partners in a general partnership have unlimited personal liability for the partnership debts, but the assets of the partnership must be exhausted first. The partnership is liable for the torts committed by the partnership’s employees and partners for acts committed within the scope of their business duties. New admitted partner has no personal liability for existing partnership debts and obligations.

15. Liabilities Joint and several liability (majority rule). All partners are both jointly and severally (separately) liable for all partnership debts and liabilities that cannot be satisfied from the partnership’s assets. A judgment creditor can attempt to collect the amount due against the personal assets of any of the general partners- -regardless of their percentage interest in the partnership.

16. Dissociation Dissociation occurs when a partner ceases to be associated with the partnership’s business. This may occur by: – A partner voluntarily giving notice of intent to withdraw. – Occurrence of event specified in the partnership agreement (such as death). – By a unanimous vote of other partners. A “wrongful” dissociation by a partner may result in liability to the partnership. Upon a dissociation, the partnership must either: – Buy out the exiting partner’s interest and continue operating; or - Terminate the partnership and distribute remaining assets among all of the partners.

17. Termination of Partnership Business The termination of a partnership occurs in two stages: – Dissolution is the legal “death” of the partnership (may be triggered by agreement or by a partner withdrawal), and – Winding up (collecting and distributing partnership assets).

18. The grounds of Dissolution By Agreement (sec.40) Compulsory dissolution (sec.41) On the happening of certain contingencies (sec.42) By Notice (sec.43) Dissolution by court (sec.44) -Insanity -Partners parmanent incapacity -Guilty conduct -Persistent breach of agreement -Transfer of whole interest -Loss

19. Winding up and distribution of assets: Partners have no authority to conduct partnership business after dissolution occurs except to: –Complete transactions already begun. –Wind up by collecting and preserving partnership assets, discharging liabilities, and accounting to each partner for the value of his share. If liabilities are greater than assets, partners are liable for the losses in the same proportion in which they shared profits, unless agreed otherwise. If one partner does not contribute his share to cover losses, other partners are liable for his share, but they have the “right of contribution” against that partner that didn’t pay.

20. Advantages and disadvantages of partnership Advantages – Easy to create and maintain; no state formation documents – Single level of taxation: partnership does not pay federal income taxes. Partners report and pay federal income taxes on their allocated share of partnership income. – Management flexibility (may designate managing partner) Disadvantages – Partners are personally liable for contracts, torts, and business debts. – Financing is difficult to obtain (partner contributions or debt are generally the only options).