A partnership firm can be described as a group or organization which is formed with two or more persons to run a business with the view of profit earning. Before knowing how to form a partnership firm, one must have a clear idea of what is a partnership firm. The Indian Partnership Act, 1932 govern this type of firm.
Before knowing how to form a partnership firm, one must have a clear idea of what is a partnership firm. In simple words, a partnership firm can be described as a group or organization which is formed with two or more persons to run a business with the view of profit earning. Each member of this organization is known as a partner and collectively known as a partnership firm. The Indian Partnership Act, 1932 govern this type of firm.
According to section 4 of the Indian Partnership Act, 1932,
The characteristics of a partnership firm are –
A partnership firm isn't a separate legal entity. But according to the Indian Partnership Act, 1932, a firm must be formed from a legal agreement between all the partners so a contract must be entered into to make a partnership firm.
It is an agreement between partners during which rights, duties, shares of profits, and other obligations of each partner are specified. The partnership deed may be written or oral, although having a written contract will help us avoid any future issues.
The following are the essential characteristics to start a partnership firm:
The partners in an organization are free to choose any name as they desire for their partnership firm. But one has to maintain the following rules:
The Indian Partnership Act, 1932 governs participation. Registration of a partnership firm is optional and at the discretion of the partners. A partnership firm can be registered at any time. It is always advisable to register a firm as registered firms enjoy exclusive rights not available to unregistered firms. Registration of a partnership firm could also be done before starting the business or anytime during the continuance of partnership. However, when the firm intends to file a case in the court to enforce rights arising from the contract, the registration should be done before filing the case.
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