What is a General Partnership firm? How to open a General Partnership firm?
Partnership in business arises when existing proprietary interest has got some
growth and there is an intention of the proprietor to expand the existing business.
Partners are a group of persons who have entered into Partnership Agreement with one another. According to Section 4 of the Indian Partnership Act, 1932, Partnership is the relation between the persons who have agreed to share the profits of a business carried on by all or any of them acting for all.’ Partners have to collectively decide a firm name under which a Partnership Business is carried out.
Partnership Deed or Agreement is actually the terms and conditions of partnership business which is mentioned in writing. A Partnership firm must have a minimum of two persons at any time during the entire life of the Partnership firm. However, maximum partners permitted are total 50.
Any individual partner cannot act as the sole owner of any of the assets of the business. Also, every partner has the right to take part in the management of the business. Liability of each partner is unlimited, joint and several.
Advantages of the Partnership business
- Partnership firm or business can be easily formed with a minimum 2
members. - The registration process is simple.
- For Partnership firm, it is not compulsory to publish accounts and other data so the business secrecy can be maintained.
- Decisions are taken by partners collectively and in a sound manner. A partnership firm is a personal business
Registration of Partnership
The Indian Partnership Act 1932 does not make it compulsory to register a Partnership firm. However, registration of a Partnership firm is always advisable.
The procedure of Registration: If a Partnership firm wants to register itself
then it must make an application to the Registrar of firms. The form for
registration is available at the Registrar’s office and Partners are required to
fill in the following information:
a. The name of the firm
b. The principal place of the firm (Head Office)
c. Name of the other place where the firm has a business (Branches)
d. The date when each partner joined the firm
e. The name and addresses of the partners.
f. The duration of the firm. (In case of Partnership at will/for particular
period)
After all the rest of the process if Registrar is satisfied then he will issue a
Certificate of Registration.
Types of Partners
- Active or Actual Partners: A partner who takes an active interest in the
working of the business. - Sleeping or Dormant Partner: A partner who contributes capital, shares
profits and contributes to the losses of business but does not take part in
the working of the business - Nominal Partner: Partner who does not bring capital nor takes an active
interest in the working of the firm. - Minor Partner: A minor cannot enter into a contract according to the
Indian Contract Act, 1872 because a contract by a minor is void. However,
a minor may be admitted for the benefits of an existing partnership with the consent of all partners. - Partner in profits only: A partner who shares only the profit and not losses.
- Partner with limited liability: A partner whose liability is limited to the
extent of his investment - Secret Partner: A partner who does not want to be known as a partner to the third parties.
- Quasi Partner: A partner in Partnership firm who retired from firm but left
his capital with the firm. - Sub-Partner : A partner who agrees to share their own profit derived from
the firm with a third person is known as sub-partner.
Types of a Partnership firm :
There are two types of Partnership firms, namely: General Partnership and
Limited Liability Partnership.
- General Partnership: General Partnership came into existence with the
provisions of Indian Partnership Act, 1932’ and in General Partnership,
every partner has equal rights.
General Partnership comprises of three types :
(a) Partnership at will: When there is no clause in Partnership
Agreement regarding the time period for Partnership then it is said to
be Partnership at will.
(b) Partnership for Particular Period: When a partnership business is
formed for a specific and particular time period then it is known
as Partnership for Particular Period.
(c)Partnership for Particular Venture: When Partnership firm is
formed for particular business then such partnership is called as
Partnership for Particular Venture.
2. Limited Liability Partnership: Limited Liability Partnership also known
as LLP came into existence according to the provisions of ‘Limited
Liability Partnership Act, 2008’.
There are two kinds of Partners in LLP :
(a) Designated Partner: Every Limited Liability Partnership have
at least two Designated Partners and one partner must be resident
of India.
(b) General Partner: In LLP, all other partners are General Partners.
