Partnership | Features of Partnership | Clauses In a Partnership Deed
a sole proprietor may not able to deal with with the financial and managerial demands of the present day business world. If there will be two or more person (individuals) may easily pool their financial and nonfinancial resources to carry on a business.
Section 4 of the Partnership Act, 1932 says, “Partnership is the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all.”
Features of a partnership :-
- Existence of an agreement– the relation of partnership arises from contract between parties and not from status as it happens in case of HUF (Hindu Undivided Family) and formal or written agreement is not necessary to create a partnership.
- Sharing of profit – Indian Partnership Act, 1932 does not insist upon sharing of losses, the persons must agree to share the profits of the business. Because partner has the right to share the profits of the business.
- Business – A partnership can exist only in business. Section 2 (b) of Indian Partnership Act, 1932 states that business includes every trade, occupation and profession.
- Mutual agency – means business is to be carried on by all or any of them acting for all. If the person carrying on the business acts not only for himself but for others then relationship of principals and agents will exist.
- Minor as a partner – A minor can be partner in partnership firm, but can be admitted to share profit only.
Note :- Minimum partners can be 2 and the maximum number of partners in partnership are 50. Rule 10 of Companies (incorporation) Rules 2014 specifies the maximum limit.
Clauses In a Partnership Deed
- Name of the firm and the partners.
- Amount of capital to be contributed by each partner.
- Commencement and duration of business
- Drawings limit and the timings of drawings.
- Rate of interest on capital
- Rate of interest on loan given to the firm by partners.
- Rate of interest on drawings.
- Profit or losses sharing ration.
- Salary to partners.
- Any variations in the mutual rights and duties of partners.
- Method of valuation of goodwill.
- Procedure of retiring partners and the method of payment of his dues.
- Basis of the determination of the executors of a deceased partner and the method of payment;
- Treatment of losses arising out of the insolvency of a partner;
- Procedure for settlement of disputes among partners;
- Preparation of accounts and their audit.