Partnership is defined as an association of persons who agree to share profits of a business carried on by all or by anyone of them. The four essentials of a partnership are:
A partnership is created by an agreement and not by status. There is a distinction made in law between partnership and other business relations like joint family carrying on business, which do not arise by agreement, but are result of status, succession or inheritance.
In a partnership either all or any one acting for all should carry on the business of the firm. The business should be on a continuing basis and not just a single transaction.
3. Sharing of profit:
The partners must share the profit earned by the firm in any agreed upon ratio. The real status of the parties should however be kept into view while looking into this clause.
4. Mutual agency:
Every partner is a principal as well as an agent of every other partner thus every partner is bound by the acts of other partners as they have implied authority acquired from each other.
PARTNERS, FIRM AND FIRM NAME
The persons entering into a partnership are called “partners” individually and “Firm” collectively and the name under which they are carrying business is called “Firm name.
The name however is only for convenience sake and has no significance except that for convenience sake we say ‘Firm Employees’, ‘Firm Property’ etc. There can not be any partnership of firms. The firm is an entity distinct from persons forming it only for the purposes of Income Tax under “ Income Tax Act 1961”.
In choosing a firm name following rules are to be observed:
1. The firm name should not be similar or identical to the existing firm names, or to the trademark or goodwill of the firms engaged into similar business. 2. The name should not be such...