MADE BY Akshay Malik Apoorv Soni Chirag Dua Dhruv Chadha Gagan Khurana Gaurav Aggarwal Hriday Khanna

MEANING AND DEFINITION OF PARTNERSHIP

Section 4 of the Partnership Act, 1932 defines the term Partnership as under: PARTNERSHIP IS THE RELATION BETWEEN TWO OR MORE PERSONS WHO HAVE AGREED TO SHARE THE PROFITS OF A BUSINESS CARRIED ON BY ALL OR ANY OF THEM ACTING FOR ALL . Thus, Partnership is the name of legal relationship between/among persons who have entered in to the contract.

MEANING OF PARTNER, FIRM AND FIRM NAME

y Section 4 of Indian Partnership Act, 1932 provides that:

Persons who have agreed into partnership with one another are called individually PARTNERS and collectively FIRM and the name under which their business is carried on is called the FIRM NAME Partnership is thus Invisibility which binds the partners together and firm is the visible form of those partners who are thus bound together .

MAXIMUM LIMIT ON NUMBER OF PARTNERS

y Section 11 Companies Act provides that the maximum no. of persons, a firm can have:

If the number of partners exceeds the aforesaid limit, the partnership firm becomes an illegal association. If an association of persons or firm having members or partners exceeding the above limit will not be an illegal association if that firm s objective is not to earn profit.

ADVANTEGES OF PARTNERSHIP FIRM

y Easy to form: Like sole proprietorships, partnership businesses can be formed easily without any compulsory legal formalities. It is not necessary to get the firm registered. A simple agreement or partnership deed, either oral or in writing, is sufficient to create a partnership. y Availability of large resources: Since two or more partners join hands to start a partnership business, it may be possible to pool together more resources as compared to a sole proprietorship. The partners can contribute more capital, more effort and more time for the business.

ADVANTEGES OF PARTNERSHIP FIRM

y Better decisions: The partners are the owners of the business. Each of them has equal right to participate in the management of the business. In case of any conflict, they can sit together to solve the problem. Since all partners participate in the decision-making process, there is less scope for reckless and hasty decisions. y Flexibility in operations: A partnership firm is a flexible organization. At any time, the partners can decide to change the size or nature of the business or area of it s operation. There is no need to follow any legal procedure. Only the consent of all the partners is required.

ADVANTAGES OF PARTNERSHIP FIRM

y Protection of interest of each partner: In a partnership firm, every partner has an equal say in decision making and the management of the business. If any decision goes against the interest of any partner, he can prevent the decision from being taken. In extreme cases an unsatisfied partner may withdraw from the business and can dissolve it. In such extreme cases the partnership deed is required. In absence of the partnership deed, no legal protection is given to the partners.

DISADVANTEGES OF PARTNERSHIP FIRM

y Unlimited liability: All the partners are jointly liable for the debt of

the firm. They can share the liability among themselves or any one can be asked to pay all the debts even from his personal properties depending on the arrangement made between the partners. y Uncertain life: The partnership firm has no legal existence separate from it s partners. It comes to an end with death, insolvency, incapacity or the retirement of a partner. Further, any unsatisfied or discontent partner can also give notice at any time for the dissolution of the partnership. y No transferability of share: If you are a partner in any firm, you cannot transfer your share or part of the company to outsiders, without the consent of other partners. This creates inconvenience for the partner who wants to leave the firm or sell part of his share to others.

DISADVANTAGES OF PARTNERSHIP FIRM

y Lack of harmony: In a partnership firm every partner has an equal right to participate in the management. Also, every partner can place his or her opinion or viewpoint before the management regarding any matter at any time. Because of this, sometimes there is a possibility of friction and discontent among the partners. Difference of opinion may lead to the end of the partnership and the business.

TYPES OF PARTNERS
y Active Partners: The partners who actively participate in the day-to-day operations of the business are known as active partners. They contribute capital and are also entitled to share the profits of the business. They also share the losses that the business faces. y Dormant Partners or Sleeping Partners: Those partners who do not participate in the day-to-day activities of the partnership firm are known as dormant or sleeping partners . They only contribute capital and share the profits or bear the losses, if any.

TYPES OF PARTNERS
y Nominal Partner: These partners only allow the firm to use their

name as a partner. They do not have any real interest in the business of the firm. They do not invest any capital, or share profits and also do not take part in the business of the firm. However, they do remain liable to third parties for the acts of the firm. y Minor as a partner:Partnership is a contract and a contract with minor is void. Under Section 30 of Partnership Act, a minor is not able to enter into a contract and so he cannot become a partner of a firm. He can, however be admitted to the benefits of a firm with the consent of other members and that too n a business which is already operating. His liability remains limited to the extent of his share in the capital. On attaining majority, he has to choose whether he has to continue as a partner or not.

TYPES OF PARTNERS
y Secret Partner: A partner who takes active part in the affairs of a

business but is not known to the public as a partner is called Secret partner . He, like other partners, is liable to the creditors of the firm to an unlimited extent He shares profits according to the agreement signed. y Special Partners: A partner who takes active part in the affairs of a business but is not known to the public as a partner is called Secret partner . He, like other partners, is liable to the creditors of the firm to an unlimited extent He shares profits according to the agreement signed.

PARTNERSHIP DEED
y A partnership is formed by an agreement. This agreement may be in writing or oral. Though the law does not expressly require that the partnership agreement should be in writing, it is desirable to have it in writing in order to avoid any dispute with regard to the terms of the partnership. The document which contains the term of a partnership as agreed among the partners is called partnership deed . y The Partnership Deed is to be duly stamped as per the Indian Stamp Act, and duly signed by all the partners.

CONTENTS OF PARTNERSHIP DEED

A partnership deed may contain any matter relating to the regulation of partnership but all provisions in the deed should be within the limits of Indian Partnership Act, 1932. However, A Partnership Deed should contain the following clause: y Nature of business y Duration of partnership y Name of the firm y Capital y Share of partners in profits and losses y Bank Account firm y Books of account y Powers of partners y Retirement and expulsion of partners y Death of partner y Dissolution of firm y Settlement of disputes

JOINT STOCK COMPANY

y A company is an association of persons formed for carrying out business activities and has a legal status independent of it s members. y The company form of organization is governed by THE COMPANIES ACT, 1956. y A company can be described as an artificial person having a separate legal entity, perpetual succession and a common seal.

JOINT STOCK COMPANY

y The shareholders are the owners of the company while the Board of Directors is the chief managing body elected by the shareholders. y Usually, the owners exercise an indirect control over the business. y The capital of the company is divided into smaller parts called shares which are transferred to the shareholders.

FEATURES OF JOINT STOCK COMPANY

y Artificial person y Separate legal entity y Formation y Perpetual succession

FEATURES OF JOINT STOCK COMPANY

y Control y Liability y Common seal y Risk bearing

TYPES OF COMPANIES
There are two types of companies: y PRIVATE COMPANY

yPUBLIC COMPANY

PRIVATE COMPANY
y Has a minimum of 2 and maximum of 50 members. y Must have a minimum paid up capital of

Rs. 1

lakh.
y Restricts the right of members to transfer its shares.

PRIVATE COMPANY
y Issue of prospectus y Allotment of shares y Start of the business after certificate of incorporation y No restrictions on amount of loans by govt.

PUBLIC COMPANY
y Has a minimum of 7 members and maximum could be

unlimited.
y Minimum paid up capital is 5 lakh. y No restriction on transfer of shares.

PUBLIC COMPANY
y Issue of prospectus y Allotment of shares y Start of business after certificate of commencement. y Restriction on loans

ADVANTAGES OF JOINT STOCK COMPANIES

y Large Financial Resources: A joint stock company is able to collect a large amount

of capital through small contributions from a large number of people. In public limited company shares can be offered to the general public to raise capital.

y Limited Liability: In case of a company, the liability of its members is limited to the

extent of the value of shares held by them.

y Professional management: Management of a company is vested in the hands of

directors, who are elected democratically by the members or shareholders.

ADVANTAGES OF JOINT STOCK COMAPNIES

y Large-scale production: Due to the availability of large financial resources and technical

expertise it is possible for the companies to have large-scale production. It enables the company to produce more efficiently and at lower cost.

y Contribution to society: A joint stock company offers employment to a large number of

people. It facilitates promotion of various ancillary industries, trade and auxiliaries to trade.

y Research and Development: Only in company form of business it is possible to invest a lot of

money on research and development for improved processes of production, new design, better quality products, etc. It also takes care of training and development of its employees.

DISADVANTAGES OF JOINT STOCK COMPANIES

y Difficult to form: The formation or registration of joint stock company involves a complicated

procedure. A number of legal documents and formalities have to be completed before a company can start its business.

y Excessive government control: Joint stock companies are regulated by government through

Companies Act and other economic legislations. Particularly, public limited companies are required to adhere to various legal formalities as provided in the Companies Act and other legislations.

y Delay in policy decisions: Generally policy decisions are taken at the Board meetings of the

company. Further the company has to fulfill certain procedural formalities. These procedures are time consuming and therefore, may delay action on the decisions.

DISADVANTAGES OF JOINT STOCK COMPANIES

y Concentration of economic power and wealth in few hands: A joint stock company is a large-scale business organization having huge resources. This gives a lot of economic and other power to the persons who manage the company. Any misuse of such power creates unhealthy conditions in the society.

LIST OF DOCUMENTS REQUIRED BY A JOINT STOCK COMPANY

MEMORANDUM OF ASSOCIATION (MOA)

ARTICLES OF ASSOCIATION (AOA)

CONSENT OF DIRECTORS

STATUTORY DECLARATION

(1) MEMORANDUM OF ASSOCIATION (MOA)

 The Memorandum Of Association (MOA) Is the most Important

document as it defines the objectives of the Company.

 No company can legally undertake activities that are not contained

in the in Its Memorandum Of Association (MOA).

 The Memorandum contains different clauses which are Name

Clause, Registered Office clause, Objects clause , Liability Clause , Capital clause, Association Clause.

(2) ARTICLES OF ASSOCIATION (AOA)

 The Articles of Association (AOA) are the Rules Regarding the Internal Management of a company.  These rules are subsidiary to the Memorandum of Association (MOA) and should not contradict of exceed anything stated in the MOA.  A Public Limited company can adopt Table A which is a model set of articles given by the Companied Act.  The company has a choice to either choose Table A or to prepare a separate Articles of Association (AOA).

(3) CONCENT OF PROPOSED DIRECTORS

 Apart form the MOA & AOA, a written consent of each person named as director is required along with his capacity and willingness to buy and pay for the Qualification Shares.

(4) STATUTORY DECLARATION

A declaration stating that all the legal requirements pertaining to registration have been duly completed and signed by a advocate of High Court Or Supreme Court Or a Chartered Accountant needs to be submitted to the registrar of Companies(ROC) , along with the due fees.