The essential elements of

Partnership
Sec 4 of the Partnership act defines
a partnership as follows :
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

A partnership as defined in the act must

have three elements :
There must be an agreement entered into by
two or more persons.
The agreement must be to share the profits
of a business
The business must be carried on by all or
any of them acting for all.

 Voluntary agreementvoluntary contractual nature

arise as a result of agreement expressed
or implied
cannot be formed with more then 10
persons in banking and 20 in other types
of business

 Partnership not created by status :

HUF
Eg: Sole proprietor

 Sharing of profit- motive behind

partnership
Mutual agency Persons carrying on
business in partnership are agents as well
as principals

 Registration of firms
The formalities of registration sec 56-71.
Sending a statement to the registrar of firms in prescribed
form and accompanied by the fees and stating the
following:
The name of firm,the place or principal place of business,
the names of any other places where the firm carries on
business,the date when each partner joined the firm,the
names in full and permanent addresses and the
duration.The statement must be signed and verified by
all partners.On receipt of registration the registrar
records an entry of the statement in the register of firm
and the firm is thereupon considered to be registered.

 Consequences of non registrationCannot file suit against the firm or any

partner for the purpose of enforcing a right
arising from the contract.
No suit can be filed on behalf of an
unregistered firm against any third party

 Exceptions A partner of an unregistered firm can file a suit

for the dissolution of the firm and for account.
Suits can be filed for the realization of the
properties of an insolvent partner of an
unregistered firm
The official assignee or receiver can realise the
properties of an insolvent partner of an
unregistered firm

 Who can be a partner?

Person : Has the capacity to enter into a contract
Minor:A minor cannot be a partner.But in an existing
partnership a minor can be admitted if all the partners
agree.
Person of unsound mind : cannot
Woman: A woman can be partner married or unmarried
Company: In a company the capacity to enter into contract
is determined by the memorandum and articles of
association.The liability of the members of a firm under
the partnership act for the debts of the firms is unlimited.
But a company cannot incur unlimited liability.

 Classes of partners Active Partner An active partner is one who

actually participates in the business
Dormant,sleeping or nominal partner- these
partners join the firm by agreement but do not
take any active part in the business. Their
liabilities are same as of active partners.
Sub-partner- The transferee of a share of a
partners interest in a firm is called a subpartner.