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mgt611 Assignmet 2016




Q.1 Define Partnership and explain it briefly.
Answer
Partnership:
According to partnership acct 1932 partnership is
“A type of business in which two are more than individuals agreed to share profit on agreed ratio and also acting all or on of than act for all”
Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all Persons who have entered into partnership with one an­other are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”.
Things to Consider When Forming a Partnership
1.      Plan for the worst
 One of the very first things you should think about is a buy/sell agreement. Essentially this is a discussion of what will happen if someone wants out. How assets, liabilities, equipment, clients, the company should be handled. This alone can be an incredibly complex process to outline.
2. Keep it Equal in Shares
There is a tendency to want to be the majority shareholder, or to have one person as the majority shareholder in the company. After all if a decision can be reached, what do you do if no one has more weight than the other? However it is better to develop system of deliberation and problem solving than to assign majority shareholding to one person. To have majority ownership of a company would permit one to fire the other partners, spend all the profits of the company in his/her own salary and essentially leave the person who has minority ownership with nothing.
3. Develop an Operating Agreement
 It is important that everyone is on the same page when it comes to how the business will be run. Like anything in life the more you plan the smoother things will run. You would hate to arrive day one and realize that no one wants to do the sales, and the company can’t even get off the ground. This will also help establish validity if you feel that one partner is not pulling their weight, and should be paid less because of it.

Q.2 Explain mutual rights and liabilities of partners in a Partnership according to section 13 of the Partnership Act 1932
Answer
Rights of a Partner:
The rights of a partner are as follows:
i. Right of the partner to take part in the day-to-day management of the firm.
ii. Right to be consulted and heard while taking any decision regarding the business.
iii. Right of access to books of accounts and call for the copy of the same.
iv. Right to share the profits equally or as agreed upon by the partners.
v. Right to get interest on capital contributed by the partners to the firm.
vi. Right to avail interest on advances paid by the partners for business purpose.
vii. Right to be indemnified in respect of payment made or liabilities incurred or for protecting the firm from losses.
viii. Right to the use of partnership property exclusively for partnership business only not himself.
ix. Right as agent of the firm and implied authority to bind the firm for any act done in carrying the business.
x. Right to prevent admission of new partners/expulsion of existing partners.
xi. Right to continue unless and otherwise he himself cease to become partner.
xii. Right to retire with the consent of other partners and according to the terms-and conditions of deed.
xiii. Right of outgoing partner/legal heirs of deceased partner.

2. Liabilities of a Partner to Third Parties:

The following are the liabilities of a partner to third parties:
i. Liability of a partner for acts of the firm:
Every partner is jointly and severally liable for all acts of the firm done while he is a partner. Because of this liability, the creditor of the firm can sue all the partners jointly or individually.
ii. Liability of the firm for wrongful act of a partner:
If any loss or injury is caused to any third party or any penalty is imposed because of wrongful act or omission of a partner, the firm is liable to the same extent as the partner. However, the partner must act in the ordinary course of business of the firm or with authority of his partners.
iii. Liability of the firm for misutilisation by partners:
Where a partner acting within his apparent authority receives money or property from a third party and misutilises it or a firm receives money or property from a third party in the course of its business and any of the partners misutilises such money or property, then the firm is liable to make good the loss.
iv. Liability of an incoming partner:
An incoming partner is liable for the debts and acts of the firm from the date of his admission into the firm. However, the incoming partner may agree to be liable for debts prior to his admission. Such agreeing will not empower the prior creditor to sue the incoming partner. He will be liable only to the other co-partners.
v. Liability of a retiring partner:
A retiring partner is liable for the acts of the firm done before his retirement. But a retiring partner may not be liable for the debts incurred before his retirement if an agreement is reached between the third parties and the remaining partners of the firm discharging the retiring partner from all liabilities. After retirement the retiring partner shall be liable unless a public notice of his retirement is given. No such notice is required in case of retirement of a sleeping or dormant partner.

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