Partership

Define partnership. What are the essential characteristics? What do you understand by a firm and firm name. State the differences between a partnership and a firm.

Sure, let's dive into the intricacies of partnership law in India.

Definition of Partnership

A partnership is defined under Section 4 of the Indian Partnership Act, 1932. It states that "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."

Essential Characteristics of a Partnership

  1. Agreement: There must be an agreement between the partners. This agreement can be oral or written.
  2. Business: The partnership must be formed to carry on a business. The term 'business' includes every trade, occupation, and profession.
  3. Profit Sharing: The partners must agree to share the profits of the business. Sharing of losses is not essential.
  4. Mutual Agency: The business must be carried on by all the partners or any of them acting for all. This means each partner is both an agent and a principal.

Firm and Firm Name

  • Firm: A firm is the collective term for the partners who have entered into a partnership with one another.
  • Firm Name: The name under which the business of the firm is carried on.

Differences Between a Partnership and a Firm

  1. Definition: A partnership is the relationship between the partners, whereas a firm is the collective term for the partners.
  2. Legal Entity: A partnership is not a separate legal entity, while a firm is recognized as a collective entity of the partners.
  3. Name: The partnership does not have a name, but the firm operates under a firm name.

Relevant Case Laws

  1. Cox v. Hickman (1860): This case established the principle of mutual agency in partnerships.
  2. Badridas Daga v. CIT (1958): This case highlighted the importance of profit-sharing in defining a partnership.

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