Types of Partnership :
When two or more than two individuals come together and make a business entity, they enter into the agreement referred to as the partnership. When such an agreement obtains a written role, it is said to be known as a partnership deed.
Features of Partnership
There are some following features of partnership:
- Agreement between partners: It is an association of two or more individuals, and a partnership arises from an agreement or a contract. The agreement (accord) becomes the basis of the association between the partners. Such an agreement is in the written form.
- Two or more persons: In order to manifest a partnership, there should be at least two (2) persons possessing a common goal. To put it in other words, the minimal number of partners in an enterprise can be two (2).
- Sharing of profit: the definition held in the Partnership Act elucidates – partnership as an association between people who have consented to share the gains of a business, the sharing of loss is implicit. Hence, sharing of gains and losses is vital.
- Business motive: It is important for a firm to carry some kind of business and should have a profit gaining motive.
- Mutual business: The partners are the owners as well as the agent of their firm. Any act performed by one partner can affect other partners and the firm. It can be concluded that this point acts as a test of partnership for all the partners.
Types of Partnership
A partnership is divided into different types depending on the state and where the business operates. Here are some general aspects of the three most common types of partnerships.
- General Partnership:
A general partnership comprises two or more owners to run a business. In this partnership, each partner represents the firm with equal right. All partners can participate in management activities, decision making, and have the right to control the business. Similarly, profits, debts, and liabilities are equally shared and divided equally.
- Limited Partnership:
In this partnership, includes both the general and limited partners. The general partner has unlimited liability, manages the business and the other limited partners. Limited partners have limited control over the business (limited to his investment). They are not associated with the everyday operations of the firm.
- Limited liability partnership:
In Limited Liability Partnership (LLP), all the partners have limited liability. Each partner is guarded against other partners legal and financial mistakes. A limited liability partnership is almost similar to a Limited Liability Company (LLC) but different from a limited partnership or a general partnership.
- Partnership at Will:
Partnership at Will can be defined as when there is no clause mentioned about the expiration of a partnership firm. Under section 7 of the Indian Partnership Act 1932, the two conditions that have to be fulfilled by a firm to become a Partnership at Will are:
- The partnership agreement should have not any fixed expiration date.
- No particular determination of the partnership should be mentioned.
Therefore, if the duration and determination are mentioned in the agreement, then it is not a partnership at will. Also, initially, if the firm had a fixed expiration date, but the operation of the firm continues beyond the mentioned date that it will be considered as a partnership at will.
Every owner contributes something to the welfare of the firm. These can be in the form of ideas, property, money and sometimes a combination of all these. Owners of a Partnership share profits and losses in proportion to their respective investments. If you have any doubt regarding this, you have contact company suggestion.