The Partnership | Legal forms of Business | Business Finance | Lecture 6 скачать в хорошем качестве

The Partnership | Legal forms of Business | Business Finance | Lecture 6

In this lecture we discuss a legal form of business called ‘Partnership’. “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. (Partnership Act 1932). Some of the features of partnership are:- 1. Two or More Persons: At least two persons must pool resources to start a partnership firm. The Partnership Act, 1932 does not specify any maximum limit on the number of partners. However, the Companies Act, 2017 (Pakistan) and 1956 (India) lays down that any partnership or association of more than 10 persons in case of banking business and 20 persons in other types of business is illegal unless registered as a joint stock company. 2. Agreement: A partnership comes into being through an agreement between persons who are competent to enter into a contract (e.g. Minors, lunatics, insolvents etc. not eligible). The agreement may be oral, written or implied. 3. Registration: Under the Act, registration of a firm is not compulsory. However, if the firm is not registered, certain legal benefits cannot be obtained. The effects of non-registration are- (i) the firm cannot take any action in a court of law against any other parties for settlement of claims and (ii) in case of a dispute among partners, it is not possible to settle the disputes through a court of law. 4. Profit Sharing: The partnership agreement must specify the manner of sharing profits and losses among partners. A charitable hospital, educational institution run jointly by like-minded persons is not to be viewed as partnership since there is no sharing of profits or losses. However, mere sharing of profits is not a conclusive proof of partnership. In this sense, employees or creditors who share profits cannot be called partners unless there is an agreement between the partners. 5. Agency Relationship: Generally speaking, every partner is considered to be an agent of the firm as well as other partners. Partners have an agency relationship among themselves. The business can be carried out jointly run by one nominated partner on behalf of all. Any acts done by a nominated partner in good faith and on behalf of the firm are binding on other partners as well as the firm. 6. Unlimited Liability: All partners are jointly and severally responsible for all activities carried out by the partnership. In other words in all cases where the assets of the firm are not sufficient to meet the obligations of creditors of the firm, the private assets of the partners can also be attached. The creditors can get hold of any one partner who is financially sound and get their claims satisfied. 7. Not a Separate Legal Entity: The firm does not have a personality of its own. The business gets terminated in case of death, bankruptcy or lunacy of any one of the partners. 8. Transfer of Interest: A partner cannot transfer his interest in the firm to outsiders unless all other partners agree unanimously. 9. Mutual Trust and Confidence: A partnership is built around the principle of mutual trust, confidence and understanding between partners. Each partner is supposed to act for the benefit of all. Advantages • Two heads (or more) are better than one • Your business is easy to establish and start-up costs are low • More capital is available for the business • You’ll have greater borrowing capacity • High-calibre employees can be made partners • There is limited external regulation • It’s easy to change your legal structure later if circumstances change Disadvantages; • The liability of the partners for the debts of the business is unlimited • Each partner is ‘jointly and severally’ liable for the partnership’s debts; that is, each partner is liable for their share of the partnership debts as well as being liable for all the debts • There is a risk of disagreements and friction among partners. • Each partner is an agent of the partnership and is liable for actions by other partners • If partners join or leave, you will probably have to value all the partnership assets and this can be costly. Here are the links of previous lecture if you are interested; Lectur#01 What is Finance | Business Finance | Lecture#1    • What is Finance | Business Finance | Lectu...   Lecture#02 Types of Finance in Urdu / Hindi | Business Finance | Lecture 2    • The Types of Finance in Urdu / Hindi | Bus...   Lecture#03 What is Financial Management | Objectives | Functions | FM Decisions | Business Finance | Lecture 3    • What is Financial Management | Objectives ...   Lecture#04 The Goal of the Firm | Business Finance    • The Goal of the Firm | Business Finance | ...   Lecture #05 Sole Proprietorship | Legal forms of Business | Business Finance    • Sole Proprietorship | Legal forms of Busin...   #Parnership #LegalFormsOfBusiness #Finance #SKMarwat #FinancialManagement #Education #Business #Finance #Lectures #FinancialManagementinUrdu #IntroductionToBusiness