Partnership is an association of two or more persons to carry on as co owners of a business for profit. To run a partnership an agreement between the partners is essential.
Contents of the agreement:
The name of the firm.
The place of the business.
Nature of business.
The names and addresses of partners.
The amount of investment by each partner.
The length of life of the partnership.
The profit sharing ratio of the partners.
Extent of withdrawal by each partner.
Procedure of admission of a new partner.
A provision of salaries to partners.
A provision of dissolution of the firm.
Determination of an accounting system and a fiscal year.
Rights, duties and liabilities of partners.
The name of the banker.
The signing authority of the check.
A provision of the retirement of a partner.
Determination of goodwill.
A provision of bonus to partners.
A provision of the method of settlement of disputes.
Provision for minor partners.
Interest on capital.
Interest on loan.
Loan from partner.
Loan to partners.
The following are the types or kinds of partners:
Active partners; these are the partners who take active part in the business. They invest capital and share in profit or loss. They have unlimited liability for debts of the firm in their profit sharing ratio. They have participation in decision making and management.
Sleeping or silent partners; these are the partners who invest capital but do not take active part in the management. They have all those rights and liabilities which an active partner has. They also share in profit or loss.
Secret partners; a secret partner is one who is not known to the public as a partner. He has capital in the business, enjoy profits and shares losses. He may also participate in management and decision making.
Nominal partners; this type of partner is a person who is not a real partner, but to the general public he is declared as a partner. He has no investment in the business. He does not share in profit or loss and is not responsible for the debt of the business but is responsible for credit investment.
Minor partners; this type of partners have not attained majority. They are under 21 and they have investment with the profit sharing ratio but their liability is limited to their business investment. They are not allowed to take part in the management of the business, but they can, through their attorney, check the book of accounts.
