General partnership based on unlimited liability, further classified into partnership-at-will and particular partnership.
Special partnership is based on limited liability.
Partnership deed and its contents
Partnership is the result of an agreement between the parties, such an agreement may be oral or in writing.
1. Name of the firm and names of all the partners.
2. Nature of the business.
3. Duration of partnership.
4. Profit sharing ratio.
5. Capital contributed by partners.
6. Salary, commission of any partner.
7. Interest on partners’ capitals and drawings.
8. Rights, duties and obligations of all partners.
9. Any other matter.
Formation of partnership
- Ease of formation.
- Better capital.
- Greater specialization.
- Maintenance of secrecy.
- Credit – worthiness.
- Minimum legal restrictions.
- Sharing of risks.
- Sound decisions.
- Risk and reward.
- Protection to partners’ interest.
- Simple dissolution.
1. Lack of co-operation.
2. Limited capital.
3. Lack of public confidence.
4. Unlimited liability.
5. Non-transferability of interest.
6. Lack of faith.
7. Lack of stability.
8. Limited organizing resources. Rights and liabilities of partners.
1. Every partner is a joint owner of the property.
2. Every partner has a right to take part in the management.
3. Every partner has a right to share profits.
4. Every partner has a right to inspect books of accounts.
5. Every partner has a right to express his opinion on all matters.
6. Every partner has a right to recover any amount spent by him in the course of business.
Duties of partners:
1. Should perform his duties to the maximum advantage of the firm and should be faithful to other partners.
2. Should not make any private profit out of the business funds.
3. Should make good the loss caused to the firm by willful negligence.
4. Should not carry business in competition with the firm.
5. Should not transfer his interest in the firm to others without the consent of other partners.
Liabilities of partners:
1. Liable for the debts of the firm to an unlimited extent jointly and severally.
2. Should make good the loss that he has caused to the firm and other partners.
3. A retiring partner is liable for all debts before his retirement.
4. An incoming partner is liable for all debts after his admission to the firm.
5. The legal representatives of a deceased partner are liable to pay for the debts of the firm before the death of the partner.
6. Minor partner shares only profits but not losses or liabilities of the firm.