General Concept Of Partnership Business
The traditional form of business organization is sole trading or sole proprietary system. Because of weakness in this form i.e one man talent, capacity, knowledge, skill, qualification, experience and the like the partnership form of business organization commences in the world of business. In case of sole trading, single person is totally responsible for total affairs of the business but there is joint responsibility in the case of partnership form of business organization.
Partnership business is a business restricting its members not less than two, who contributes money or money's worth to a common stock and is known as partner's capital. The essential elements of the partnership could be laid down as follows:
* A partnership is the outcome of a valid agreement between or among partners.
* The agreement must indicate about the sharing of profits and losses of the firm.
* The business of the firm must be carried on by all or any of the partner acting for all partners.
Partnership Agreement
Since the partnership is the outcome of a valid agreement between or among partners, so it is the highway to drive the partnership named vehicle without any dispute in the days to come. The partnership agreement should be in black and white because of its formal existence, makes the highway clear and distinct. But there is no any mandatory clause available in the partnership act regarding the existence of partnership agreement in written form.
If the written agreement is not available a verbal agreement could be handy one to operate business of the firm. Whenever all the terms and conditions of operating partnership business is codified and listed in the form of written document. It becomes the deed of the partnership business. A partnership deed contains the following:
1. Name, nature and address of partnership business in detail where the permanent address of all the partners is included besides the address of the business firm.
2. The total capital of the firm, the proportion of such capital who is going ti contribute what? as well as the duration of partnership if the case concerned.
3. It should contain the ratio at what the profits and losses would be shared and the rate of interest entitled on contributed capital as well as interest payable rate in case of drawings.
4. Amount of salaries, commission and other allowances if any payable to partners followed by the amount which is available for drawings in anticipation to earned profits of the firm for private expenses.
5. Loans and advances by partners and the rate of interest there on followed by rights and duties of all the partners.
6. The nature of capital either fixed or fluctuating followed by procedure of maintaining books of account in the case of valuation of goodwill, admission, retirement, death and dissolution of partnership business.
7. The method of finding out the amount due to the retiring/the representative of a deceased partner.
8. To settle the dispute among the partners the arbitration clause, if any.
