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Questions and Answers
What is the minimum number of partners required to form a partnership business?
According to the Partnership Act of 1890, how are profits or losses shared where there is no agreement?
What is the maximum number of partners allowed in a partnership business?
What type of partners are professionally qualified and exempt from the maximum number of partners?
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What is the name of the Act that defines a partnership?
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What is the term for a partner who takes an active role in the management of the business?
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What type of partner is only responsible for a portion of the business?
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What type of partner is not actively involved in the management of the business but still shares in the profits?
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What is the term for a partnership engaged in the business of banking?
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What is the term for a partner who is only responsible for his own share of the business?
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Study Notes
Partnership Definition
- A partnership is the relationship between people carrying on a business in common with a view to profit.
- The business carried on in common is called the "partnership firm".
- The individuals who come together to carry on the business are called "partners".
- Profits or losses are shared by partners according to agreement, or equally if no agreement exists.
Number of Partners
- The minimum number of partners is two (2).
- The maximum number of partners is twenty (20), except for professional partnerships like accountants, solicitors, and stockbrokers.
- If the number of partners exceeds twenty, the association becomes illegal unless it is registered as a company.
- For partnerships engaged in banking, the maximum number of partners is ten.
Types of Partners
- Active partners: actively involved in the business.
- Sleeping or dormant partners: not actively involved in the business but share profits and losses.
- Quasi partners: not a partner but has a similar relationship to a partner.
- Nominal partners: have a name or reputation in the business but are not involved.
- General or full partners: have unlimited liability and are involved in the business.
- Limited or special partners: have limited liability and are not involved in the business.
- Name or title partners: have a name or reputation in the business but are not involved.
- Liquidating partners: responsible for winding up a partnership.
- Corporate partnership: a partnership formed between companies.
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Description
Understand the definition and basics of partnership law and accounts, including partnership firms, partners, and profit sharing.
