Finding good partner is a key to success by informationamaker.blogspot.com

“Finding good partner is a key to success, in anything; in marriage, in business and especially in investing”

When two or more persons determine their rights and duties to run any legal business under a contract, it is called “Partnership”. The persons who form the partnership are individually called “partner” and collectively known as “firm”. This type of business organization was introduced due to the following deficiencies in the sole partnership.

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• Shortage of capital
• More burden of loss
• Failure of managing business affairs

As there is more than one owner in partnership, so they can easily overcome the above mentioned deficiencies. Sometime, besides contributing their share of capital, the partner also take part in the affairs of management.

“Partnership means two or more persons working together in a business”

Main points

1. Partnership is the relationship between two or more persons.
2. The relation is developed for the purpose of business.
3. The main objective is to earn profit.
4. An agreement between partners to settle the business affairs

“Every partner may part in the affairs of business or one partner may run the business on the behalf of other partner”

Characteristics of Partnership

Agreement

Agreement is necessary to form partnership. Partnership agreement may be written or oral. But partnership agreement must be in writing in order ot avoid any future dispute.

Number of Partners

In partnership there should be at least two members. But the number or members must not exceed twenty in case of ordinary business and ten in case of banking business.

Object

If two or more persons make combine efforts for social welfare or form and institution for the same purpose then it is not called partnership. Only that business is considered as partnership, which is established to earn profit.

Unlimited liability

In partnership, the liability of each partner is unlimited. In case of loss, the private property of partners can also be used or sold to pay the business debts according to the provisions of partnership deed.

Transfer to Rights

In partnership, no partner can transfer his share or rights ot another person without the permission of all partner. If any partner does so with the consent of other partners then partnership agreement shall be revised.

Legal Entity

If the partnership business is not registered, it has no legal entity. In this case, the partnership business has no separate entity apart from its members.

Payment of Tax

In partnership business, the firm pays tax on its profit and remaining profit (after six) is distributed among the partners. The share of profit received by the partners is exempt from tax.

Audit

An unregistered firm has no legal entity. So, there is no restriction for the audit of business accounts. Due to this, business information and secerts remain with the partner and do not leak out.

Partnership Act

In Pakistan, all Partnership business are established and performed their function under Partnership Act 1932.

Management

In partnership, all the partners can participate in the activities of business according to their abilities. Sometime only particular partners are allowed to manage the business affairs. In this case only these partners are held responsible for the failure of business.

Co-operation

In partnership, mutual co-operation and trust are the important factors for the success of business. Without mutual understanding and co-operation the partnership cannot be run successfully.

Share in Capital

According to the agreement every partner contributes his share of capital in partnership business, some persons provides only skill and ability to become a partner of business and earn profit

Agent

 In partnership, every partner acts as an agent as well as principal of other partners. In the position of an agent, one can do contract with other parties (firm) on the behalf of other partners [Section 18, 19 & 22}.

Registration

It is not compulsory by law that a partnership firm should be registered. It depends upon the will of partners whether they want to register their firm or not. But it is necessary to point out that unregistered firms have to face many problems. So, it is better to get the firm registered in order to avoid the problems.

Profit and Loss Distribution

The first and foremost aim of partnership to earn profit and the profit is distributed among the partners according to their agreement. In the case of loss all the partners also share in loss.

Dissolution

Partnership is a temporary form of business. In the absence of partnership agreement, the partnership is dissolved if any partner leaves, dies or declared bankrupt etc. [Section 40, 41, 42, 43 & 44].