Partnership Business

Partnership Business
A partnership is a business structure wherein two or more persons (in general business it does
not exceeding 20, but in banking it will not more than 10), coming together as partners, decide
to share profits or losses in an agreed proportion, carrying an unlimited liability.
Features of Partnership:
 More Persons having an unlimited liability except for minor.

 Profit and loss in an agreed proportion.
 Oral or written agreement.
 Lawful Business.
 Absolute trust and belief in each other.
 Restriction on transfer of share without the consent of the other partners.
 Responsible for other partner’s deeds.
Advantages of Partnership:
 There will be combined capital, talents, skills, opinions.

 The ability of funds rising becomes easier.
 Borrowing capacity will increase.
 All the partners with different skills will work efficiently in their own way. So, this will
result in higher profits and greater sustainability and productivity.
 Everyone shares control and management.
 The distribution of the risks lead will be lower.
Disadvantages of Partnership:
 Since the partnership is not a separate legal entity, liabilities are unlimited for the
partners except minors.
 The differences in the opinion and thoughts of one or more partners.
 If the other partner has committed a mistake, the other partners will also have to face
its consequences.
 In partnership, the ideas, thoughts, secrets, are confidential. So, it will create problems
when the information is disclosed.
Md. Al-Amin
Lecturer, Department of Finance & Banking
Cumilla University
The different kinds of Partners:
1. Active or managing partner: A person who takes active interest in the conduct and
management of the business of the firm is known as active or managing partner.
2. Sleeping or dormant partner: A sleeping partner is a partner who does not take active part in
the management of the business. Such a partner only contributes to the share capital and
receives the profits and losses of the business.
3. Nominal or ostensible partner: A nominal partner is one who does not have any real interest
in the business but lends his name to the firm, without any capital contributions, and doesn’t
share the profits of the business.
4. Partner in profits only: When a partner agrees with the others that he would only share the
profits of the firm and would not be liable for its losses, he is in own as partner in profits only.
5. Quasi Partner: The partner who is retired from business but the investment is not returned is
called quasi-partner. This partner is neither liable for business activity nor has right over the
profit of business after retirement.
6. Limited Partner: The partner whose liability is limited to his investment only is called limited
liability. As the active partner, limited liability partner shares profit, invest money and
participate in business but the difference is that limited partners do not have unlimited liability
as an active partner.
7. Holding out/Estoppel Partners: The partner who represents himself as a partner but does
not invest money in business is called holding out or estoppel partners. He is a partner only in
the eye of law or creditors. This partner doesn't share profits and does not bear loss as well.
Therefore, he has no any liability of the business.
8. Secret Partners: A Partners who invests money in the business and shares profit and losses
but doesn't like to be disclosed as a partner in front of the public is called secret partners. He
provides all necessary helps assistant to business indirectly.
9. Minor as a partner: A partnership is created by an agreement. And if a partner is incapable of
entering into a contract, he cannot become a partner. Thus, at the time of creation of a firm a
minor (i.e., a person who is under 18 years) cannot be one of the parties to the contract.
But under section 30 of the Indian Partnership Act, 1932, a minor ‘can be admitted to the
benefits of partnership’, with the consent of all partners. A minor partner is entitled to his share
of profits and to have access to the accounts of the firm for purposes of inspection and copy.
Rights of Partner in Partnership:

1. Right to manage business
2. Right to express views and ideas
3. Right to inspect books account
4. Right to share profit
5. Right to be indemnified/compensation
6. Right to use property
7. Right to join the ownership
8. Right to get retirement
9. Right to bind other partners
10. Right to dissolve the business

C ompany
A registered association which is an artificial legal person, having an independent legal, entity
with a perpetual succession, a common seal for its signatures, a common capital comprised of
transferable shares and carrying limited liability.
Features of a Company:
1. Separate Legal Identity – A company is a separate legal identity, different from its members
or shareholders.
2. Limited liability of members – The liabilities upon the company’s shareholders is limited
only to the unpaid amount on the shares bought by them. Thus for a fully paid-up shares, a
member cannot be asked to contribute more, even if the company goes for liquidation.
3. Perpetual Existence – A Company has a perpetual existence, irrespective of its shareholders
coming and leaving the company till the point of its wound up.
4. Common Seal – A company has its common seal which acts as the signature of the
company.
5. Transferable Shares – Shares of a company are transferable in nature. And the transfer of
its shares from one person to another does not affect it at all.
6. Separate ownership of the property – Since the company has its own separate legal
identity, it can own and dispose property under its own name. Moreover, the property
owned by a company cannot be the property of its shareholders.
7. Capacity to sue or being sued – Since the company has its own separate legal identity, it
can enter into contracts and has capacity to sue or being sued.
Advantages of a company include that:
 Liability for shareholders is limited

 It's easy to transfer ownership by selling shares to another party
 Shareholders (often family members) can be employed by the company
 Taxation rates can be more favorable
 It has access to a wider capital and skills base.
Disadvantages of a company include that:
 Expensive to establish, maintain and wind up

 The reporting requirements can be complex
 if directors fail to meet their legal obligations, they may be held personally liable for the
company's debts
 Profits distributed to shareholders are taxable.
The difference between Private Limited Company and Public Limited Company:
S No Point of Difference Private Company Public Company

1 Members Minimum – 02 Minimum – 07
Maximum – 50 Maximum – Unlimited
2 Minimum number of 02 03
Directors
3 Mode of raising Private Arrangement Private Arrangement
capital Public Subscription
4 Nature of shares Not Transferable, unless Completely Transferable
otherwise mentioned in Articles
5 Suffix with the Private Limited Public Limited or Limited
Company’s name
C ooperative Business
Co-operative organization is a voluntary association of usually economically weaker sections of
society; who join together to achieve a common objective by fighting against some social evil-
through working collectively according to established principles of co-operation.
The characteristic features of co-operative:

1. Voluntary Association
2. Democratic Set-Up
3. Service Motive
4. No Exploitation
5. Concept of Equality
6. Each for Every One
7. Spirit of Self-Help
8. Wider-Interests of Community Looked after
9. No Place for Middlemen
10. Disposal of Surplus.
Advantages of the co-operative organization:

(i) Easy to Form
(ii) Universal Brotherhood
(iii) Fully Democratic Management
(iv) Perpetual Succession
(v) Limited Liability
(vi) Governmental Patronage
(vii) Internal Financing
(viii) Lower Operating Costs
(ix) Social Welfare Aspect
(x) Fair Distribution of Surplus

Limitations of Co-Operative Organization:
(i) Limited Capital
(ii) Inefficient Management
(iii) Rift among Members
(iv) Rigid Rules and Regulations
(v) Political Interference
(vi) Lack of Motivation

Partnership Business

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Partnership Business

 More Persons having an unlimited liability except for minor.

 There will be combined capital, talents, skills, opinions.

Rights of Partner in Partnership:

2. Right to express views and ideas

3. Right to inspect books account

4. Right to share profit

6. Right to use property

7. Right to join the ownership

8. Right to get retirement

9. Right to bind other partners

10. Right to dissolve the business

Advantages of a company include that:

 Liability for shareholders is limited

Disadvantages of a company include that:

 Expensive to establish, maintain and wind up

S No Point of Difference Private Company Public Company

The characteristic features of co-operative:

6. Each for Every One

8. Wider-Interests of Community Looked after

9. No Place for Middlemen

10. Disposal of Surplus.

Advantages of the co-operative organization:

(ii) Universal Brotherhood

(iii) Fully Democratic Management

(iv) Perpetual Succession

(v) Limited Liability

(vi) Governmental Patronage

(vii) Internal Financing

(viii) Lower Operating Costs

(ix) Social Welfare Aspect

(x) Fair Distribution of Surplus

(ii) Inefficient Management

(iii) Rift among Members

(iv) Rigid Rules and Regulations

(v) Political Interference

(vi) Lack of Motivation

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