Intoduction to Business - Chapter Three.pptx
- 1. Chapter no 3 Partnership POWER POINT SLIDES ON INTRODUCTION TO BUSINESS THE ISLAMIA UNIVERSITY OF BAHAWALPUR
- 2. What Is Partnership? Partnership is the second stage in the evolution of form of business organization. According to L.H.Haney : “partnership is the relationship between persons who agree to carry on a business in common with a view to private gain.” two or more person not exceeding 20 members.
- 3. Elements Of Partnership Association of at least two persons Contractual relation Agreement must be to share profit /loss of a business Mutual agency :every partner is agent of other partners and at the same time of the firm Partnership Act of 1932 Defines: It is the relationship between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all. Persons forming partnership are individually known as partners and collectively a firm.
- 4. Characteristics Of Partnership Formation Financing Management Restriction on transfer of interest Unlimited liability of partners Duration Taxation Implied authority
- 5. Merits Of Partnership Easy to form Favorable credit standing Large capital Greater management ability Union of business ability Profit incentive Advantages of secrecy Retention of a skilled workers Brake on hasty decisions Special protection on minor Increase in the spirit of cooperation Tax advantage Ease of dissolution
- 6. Demerits Unlimited liability of partners Limited life of firm Frozen investment Disputes among the partners Possibility of misuse of resources Loss of business opportunities Divided control Lack of public confidence Implied authority
- 7. Partnership Deed Partnership agreement in writing is called partnership deed. it is a document which is signed by all the partners and which contains all the matters determining and governing the mutual rights ,duties and liabilities of the partners in the conduct and management of the affairs of the partnership.it may also be referred to as “articles of partnership” containing the name, nature of business, capital ,duration of the firm etc
- 8. Need And Importance Of Partnership Deed The importance of partnership deed can be judge from the following facts : It forms the basis of formation of the partnership. It defines the mutual right, duties and liabilities of the partners. It helps in minimizing the areas of disputes among the partners It serves as guidepost for the conduct of firms business.
- 9. Contents Of Partnership Deed Name and location of business Nature of business Amount of capital contributed by each partners Provisions of reinvestment in business Right ,duties and obligations of each partners Life of business Method of distribution of profit and sharing of the loss Method of admitting a new partners Method for withdrawal of a partner
- 10. Retirement and death of a partner Procedure to be followed for removal of a partner Arrangements in the situation of insolvent of partner Method used in account preparations and audit Operation of bank account method for the dissolution of the firm Negotiation in the case of dispute among partners
- 11. Kind Of Partners General partners All the partners of the firm are general partners . a. Active partners/ working partners b. sleeping partners /dormant partners Special partners Whose liability is limited to the extent of their capital contributed in the firm. They can not take part in the management . Other partners Secret partners ,nominal partners ,minor partners ,partners at will ,partners in profit only
- 12. Differentiate B/W Partnership And Co Ownership Partnership and co ownership have different meanings. In partnership there is an association of two or more persons who carry on common business for earning profit .They both share the profit and loss. While co ownership refers to joint ownership in a property collectively without any business motive
- 13. Duties Of Partners Partnership Act 1932 describes the general duties of partners as under: “partners are bound to carry on the business of the firm to the greatest common advantages, to be just and faithful to each other and to render the true accounts and full information of all the things affecting the firm to any partner or his legal representative”.
- 14. Duties Of Partners Common advantage Protection Loss caused by willful neglect Due diligence Provision of information
- 15. Rights Of Partners Right to take part in the management Expression of opinion Inspection of books Right to be indemnified Right to continue Use of property Sharing of profit and loss Interest on capital Right to retire
- 16. Liabilities Of Partners Joint liability Liability of a new partner Property of deceased Liability of retiring partner Competitive business No private use of property
- 17. Admission and Withdrawal Of New Partners In A Firm According to Partnership Act, no new partner can be taken in a firm without the consent of all the existing partners. The new partner when admitted is called incoming partner. A partner may retire or withdraw from a firm with the consent of all partners, in accordance with an express agreement by the partners .
- 18. Registration Of A Firm The partnership Act of 1932 does not make compulsory for the firms to be registered with the registrar of partnership firms . However if a firm registered then it avail benefits . How Registration Is Done? The whole process of registration is divided in two parts: a. Submission of a application b. certification
- 19. a. Submission Of Application The application for registration of the firm is submitted to the Registrar of Partnership ,on a prescribed printed form. The application is to be signed by all the partners. It contains the following particulars about the firm: The name of the firm The name of the place where the firm carries on the business The partners date of joining the firm the name in full and permanent address of the partners The duration of the firm
- 20. b. Certification On receipt of the application for registration, the Registrar examine the particulars given in the application. If the Registrar is satisfied he records the name of the firm in a register called the Register of firm. If firm wishes any changes after registration then it can do it after revised application.
- 21. Advantages Of A Registered Firm Term of agreement are clear to every partners by an expert lawyer. If an issue arises among the partners then it become the basic legal document for decision. The firm gets the right to sue outside partners in court for the enforcement of its rights. A retiring partner is not held liable for the debts of the firm after the date of his retirement . Benefits to incoming partners .
- 22. Dissolution Of A Partnership If one partner of a firm dies, retires or unable to pay debt ,the remaining partners may agree to continue the firm under the same name.
- 23. Dissolution Of A Firm Dissolution of partnership firm and dissolution of partnership are two different terms. Dissolution of the partnership firm is the closure of partnership business. Here all the partners cease to carry on the business. The relationship between all the partner of a firm is broken so as to close the business of the firm.
- 24. Modes Of Dissolution Of A Firm Dissolution by agreement Dissolution by notice Compulsory dissolution Contingent dissolution Dissolution by the court
- 25. Requisites Of An Ideal Partnership An ideal partnership is one in which the partners work in full confidence, trust and confidence with one another so that the business is a success .The main requisites of an ideal partnership are: Mutual understanding Common approach Good faith Balance of skill and talent Adequate capital Written agreement registration
- 26. Forms Of Business Partnership Under Islamic Laws Shirkat-al-Mufavadha In this form of partnership the amount and type of capital contributed by each partners is equal. The profit or losses are equally distributed. Shirkat-al-Anan In this type of partnership the capital contributed by the partners is not equal. One of the partner is the major contributor of financial resources. The profit or loss divided on the basis of capital invested.
- 27. Shirkat-al-Sanai It is an association of different skills involved in the operation of a business. The profit is distributed among the partners according to the terms of agreement . Shirkat-al-Wajooh In this form of partnership, the person with high integrity, honesty and reputation join together for carrying on a business .They on the basis of high credit rating get loans and start the business. The profit or loss shared on equal basis among all partners .
- 28. Form Of Partnership General partnership The liability of all the partners is unlimited. Limited partnership The liability of the partners is limited to the extent of capital invested in the business.
- 29. Assignment Differentiate between sole proprietorship and partnership.