Meaning:- Minimum of 2 persons are required to form a partnership and maximum of 10 persons in case of banking and 20 in case of others. These persons are individually known as ‘Partners’ and collectively known as ‘Firm’.
Kinds of Partners:-
1. Active Partners:- These are the persons who actively take part in the business i.e. they are involved in day-to-day affairs of business. They take all the decisions.
2. Sleeping Partners:- Sleeping partners are those partners who are not actively involved in the business i.e. they do not take part in the day-to-day affairs of the business. But they do contribute capital and share profits and losses of the business like other partners.
3. Nominal Partner:- He neither contributes capital nor takes part in the conduct of the business. He is a person with good reputation in the market and lends his name to the firm and makes outsiders believe that he is a partner of the firm.
4. Partner in Profits only:- He only share profit but not the losses. The objective of having such partner is to make use of his capital and goodwill.
5. Partner by Estoppel:- He is not a partner of a firm in actual. He neither contributes any capital nor share profits or losses of the business. He also does not take part in the conduct of the business. His role is to make the outsiders believe that he is a partner of the firm.
6. Secret Partner:- As the name suggests, his name is not disclosed to the outsiders as a partner.
7. Minor Partners:- According to Indian Partnership Act 1932, a minor i.e. person below the age of 18 years cannot be a partner of the firm. However, with the mutual consent of all the partners he can be admitted into the partnership for the benefits of the firm.
Rights and Obligations of Partners:-
All the rights and duties should be clearly defined in the Partnership Deed. If in any case, Partnership Deed is silent on some points, then in that case rights and obligations of the partners are governed by Partnership Act’s provisions.
Rights of the Partners:-
1. Right to take part in the day-to-day affairs or management of the partnership.
2. If partnership Deed is silent on the rate of interest on partner’s loan, then the partner is entitled to the interest @ 6 %.
3. Every partner of the firm has the right to check the books of accounts and records of business.
4. A partner has the right to be indemnified for the expenditure incurred by him to protect the firm from the loss.
5. A partner can use the property of the firm for the purpose of firm’s business.
6. Right to retire from the firm in accordance with the terms and conditions of the Partnership Deed.
7. Every partner has the right to continue in the firm unless expelled according to the provisions of the deed.
8. On retirement, right to share profits in the firm earned with the help of partner’s share in the firm or interest @ 6 % p.a. until the amount due to retired partner is paid off.
9. Right to be consulted before taking important decisions.
10. Right to share the profits equally, in the absence of any agreement.
11. Right to receive interest on capital, if there are sufficient profits.
12. Every partner is co-owner of the firm.
13. Right to act independently in emergency situation to protect the firm from loss.
14. Right to inspect the entry of new partner.
15. Right to dissolve the firm with the consensus i.e. mutual consent of all the partners. But in case, if partnership is at will, any partner can dissolve the firm by giving notice to other partners.
Duties and Obligations of Partners:-
1. Every partner of the partnership firm must act in the maximum interest of the firm.
2. Every partner must have mutual trust and confidence in other partners and they should act in faithful manner to each other and the firm.
3. Duty to render true accounts to fellow partners.
4. Duty to compensate the firm for the loss arising out of breach of trust and willful negligence.
5. A partner should not compete with the firm’s business by starting his own business.
6. Obligation to share the loss equally in the absence of any agreement between the partners.
7. A partner must not apply firm’s property for the accomplishment of his personal tasks.
8. Every partner must act within the scope of their authority.
9. A partner must not transfer his share without the mutual consent of his fellow partners.
10. Every partner must disclose the any secret profit made by them.
11. A partner must not make secret profits by using firm’s property, if he does so, he must surrender it to the firm.
12. In the absence of any previous contract between the partners, no partner is entitled to the salary.