Definition and essential of partnership LLB notes

Definition and essential of partnership;-

Definition (Article#4)

"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."

Who is Partner?

Persons who have entered into partnership with one another are individually called 'partners'. A partner has the legal status of a person.

What is Firm?

Persons who have entered into partnership with one another are collectively called 'firm'. As far as the legal status of a firm is concerned, it is neither a person nor a legal entity. It has no existence apart from its members. A firm carries a business under some name, it is called 'firm name'.

Essentials of Partnership

The definition of partnership establishes following essentials of the 'Partnership'.

A. Specified Number of Persons;-

A person is a legal entity who may enter into a partnership with any other person. But it has been specified that the number of persons making going for partnership must be at least two. Partnership is the name of association of at least two persons.

It has been noted in the Company Law that the number of persons in partnership must not exceed 20. So, this check of company law is ought to be observed in order to ensure existence of a legal partnership.

B. Existence of an Agreement;-

Section#5 of the Act states that, "The relation of partnership arises from contract and not from status."

Illustration;-

In particular the members of a Hindu undivided family carrying on a family business as such, or a Burmese Buddhist husband and wife carrying on business as such are not partners in such business.

C. Business;-

Section#2(B) of the Act says, "Business includes every trade, occupation and profession." So, it is essential to launch partnership for some appropriate legal business. In case the business is illegal or later any clause of any act enforced in the country goes contrary to a business then the partnership will automatically dissolve.

D. Sharing the Profits;-

A partnership basically aims at running a business with efficient management and gaining the desired profit. The agreement between two or more partners must be upon some business, the profit from which will be shared by them. The agreement to share business can be express as well as implied. The acquiescence of carrying on a business with one or more persons and gaining profit from it will be taken as implied consent to the partnership. On the other hand, sharing the losses does not constitute partnership.