Partnership ACT for CA Foundation

The Indian Partnership Act, 1932 governs partnerships in India and is a key part of the Business Laws syllabus for the CA Foundation exam.

Definition of Partnership

According to Section 4:

"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."

Key Elements of a Partnership

1. Agreement – Must be voluntary and based on mutual consent.

2. Number of Persons – Minimum 2; maximum 50 (as per Companies Act).

3. Business – Should be legal and for profit.

4. Profit Sharing – Not necessarily equal, but must be shared.

5. Mutual Agency – Each partner is both agent and principal.

Types of Partnerships

1. Partnership at Will – No fixed duration.

2. Particular Partnership – Formed for a specific venture or time period.

Types of Partners

1. Active Partner

2. Sleeping (Dormant) Partner

3. Nominal Partner

4. Partner in Profits Only

5. Minor Partner (for benefits only)

Rights of Partners

• Take part in business.

• Share profits.

• Access books.

• Get interest on capital (if agreed).

Duties of Partners

• Act honestly.

• Work for the benefit of the firm.

• Disclose any secret profit.

Dissolution of Partnership

Can happen:

• By agreement.

• On the expiry of the term.

• On death or insolvency of a partner.

• By court order.

Study Tip

Focus on:

• Section numbers (e.g., Sec 4, 6, 30)

• Case laws (like Cox v. Hickman)

• Differences (e.g., between partnership & company)