The Partnership Act 1932 lays down the laws on Partnership in India. Partnership is the relation between persons who have agreed to share the profit of business carried on by all or any of them acting for all. Persons who have entered into Partnership with one another are called individually “partners” and collectively “a firm” and the name under which their business is carried on is called the “firm name”.
A partnership four essential features:
1. It is a result of agreement
2. That it is organize to carry on the business
3. 3. That the persons agree to share the business that the persons concerned agree to share the profit of the business
4. That the business is to be carried on by all or any of them acting for all.
It is always advisable to have formal partnership agreement. Though having formal agreement is not mandatory, it would be in the interest of the concerned parties to enter into the agreement which lays down the terms and conditions on which partnership can function.
Registration of the Partnership Deed is necessary as it enables the firm from enforcing any right in a Court of Law.
The Act sets out general duties of partners. These are as follows…
1. Duty of good faith- partners or bound to carry on business of the firm to the common advantage and to be just and faithful to each other as also to render True Accounts and full information of all things to affecting the firm.
2. 2. Duty not to compete- partners or duty bound not to carry on any business similar to or in competition with the business.
3. Due diligence – every partner is bound to act diligently in his duties in the conduct of the business.
4. Duty to Indemnify for Fraud – every partner is duty bound to indemnify the firm for any laws cost to it by partners fraud in the conduct of the business
5. Duty to render True Accounts-partners or bound to render True Accounts and full information of all things affecting the firm.
6. Proper use of property – partners or abound to use property of the firm for purposes of the business
7. Duty to Account for Personal Profits- when a partner mix any profit for himself from any transaction of the firm he is duty bound to account for profit and pay to the firm.
A partnership can be created for a fixed period or a particular a business. Partners of firm or bound and liable to the third parties for acts of the firm during the subsistence of the partnership.
Partners have the right have the right to dissolve the partnership.
An individual partner may also exit from the firm by selling his share of the partnership to the firm to the third party with the concern of the remaining partners.