The Nature of Partnership

Question 1

Definition of partnership

Answer 1

Relation between persons who have agreed to share profits of a business carried on by all or any of them acting for all.

Question 2

Essentials of partnership

Answer 2

1- There must be an agreement
2- Two or more persons (Banking , others)
3- Carry on business (not a charitable work , not sharing rent)
4- There must be sharing of profits (not a conclusive evidence)
5- Mutual Agency
6- No separate legal status
7- joint and several unlimited liability

Question 3

Exceptions of must be sharing profit

Answer 3

1- Lender
2- Employee or agent
3- Retired partner or widow/child
4- Previous owner
5- minor admitted to be benefit
6- Transferee of interest

Question 4

Difference between partnership and co-owner ship

Answer 4

Partnership:
Formation = created by agreement
Business = Essentials
Number of persons = 2 to 20 persons
Sharing of profit = yes
Agency = partner is agent of firm for the purpose of business
Transfer of interest = cannot transfer without consent of other partners

Co-ownership
Formation = Not by agreement
Business = No
Number of persons = No limit
Sharing of profit = No
Agency = Co - owner are not agent to one another
Transfer of interest = can transfer without consent of others

Question 5

Types of partnership

Answer 5

Particular partnership
Partnership at will

Question 6

Particular partnership

Answer 6

• for specific person/period
• dissolved upon completion
• If continued = partnership at will

Question 7

Partnership at will

Answer 7

• no duration specified
• notice is given to dissolved with date
• If agreement states that partnership will be dissolved only by consent of all partners, this will not be partnership at will

Question 8

Types of partner

Answer 8

1- Actual / ostensible partner
- In management
- known to other
(Public notice required on retirement)

2- Sleeping / dormant partner
- not in partner
- not known to others
(Public notice not required on retirement)

3- Partner by estoppel
(or holding out partner)

4- silent partner (not involved in management)

5- partner in profit only (liability unlimited)

6- Nominal partner (liability unlimited)

7- sub - partner (transferee of interest)