Partnership Firms

Partnership Firms–
Partnership is governed by Indian Partnership Act 1932.–
Partnership is created by agreement.–
Partnership is created to run a business for profit.–
Minimum number of partners is 2 and maximum can be 10 for banking business and 20 for other business.–
Who can become a partner: An individual, partnership firm, limited company.–
Who cannot become a partner: Minor, insolvent, insane cannot become partner because they are not competent to contract.–
Though a minor cannot become partner, he can be admitted for sharing the benefits.–
As per Supreme Court Judgement, HUF cannot become partner as HUF cannot be liable for action of others.–
Trust cannot become partner because partnership is established for business.–
A partnership firm is registered with registrar of firms.–
Registration of a partnership firm is optional. It is not necessary that the firm be registered. But an unregistered firm can not file suit against others for recovery of its debt whereas others can file suit against the firm.–
Liability of a partner: Every partner is liable, jointly with all other partners and also personally, for all acts of the firm while he is a partner. His liability is unlimited.–
Operational Aughority: In Partnership accounts operation authority is given by all partners.–
Any change in the operational authority is also with the consent of all partners.–
Partner cannot delegate authority.–
Every partner including a sleeping partner has authority to stop payment of a cheque issued by another partner of the firm but revocation can be done only as per operational authority.–
Death of a partner: On the death of a partner, the partnership is dissolved.–
The cheques signed by the deceased, insane or insolvent partner will be paid after obtaining consent of surviving partners.–
If the account is in credit, operations are allowed for winding up of the firm.–
It the account is in debit, operations in the account should be stopped to retain liability of the deceased /insolvent partner or his/her estate and to avoid operations of the Clayton’s rule.

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