FORMS
OF BUSINESS ORGANISATIONS
In India business
organisations are normally in following forms:
·
Sole
proprietorship (where only one person runs the business activities)
·
Partnerships,
(where two or more people come together to run a business).
·
Companies
( private or public where it is possible for many persons to
subscribe for a share in business ownership)
Sole Proprietorship
A sole proprietorship
concern is a business owned by a single person.
As a sole proprietor,
there is no legal distinction between you and your business.
You can carry on
sole proprietary business in any name and style. For example,
M/S ABC Software
a proprietary concern of Mr. XYZ.
It can be set up
easily and in expensively as there is no formal requirement
for incorporation
As a sole proprietor
you don’t have to make any legal documents to begin your business
except of course to get such permissions and compliance of such
laws which are necessary for the type of business you carry
on.
The proprietor realises
all the profits, bears all the losses, and incurs all the liabilities
of the business.The personal liability of the proprietor towards
the creditors and lenders is unlimited.
PARTNERSHIP
The
Indian Partnership Act 1932 is the Act relating to formulation
of legal partnership in India.
What is the Partnership?
Definition: S/4.
Definition of "partnership" partner firm and "firm
name"
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.
Persons who have entered into partnership with one another are
called individually "partners" and collectively a
"firm" and the name under which their business is
carried on is called the firm name
Requirements to constitute
a partnership:
i)
More than one person at least two and not more then twenty.
ii) Existence of a business.
iii) Existence of the idea of making profit.
iv) Existence of an agreement between all partners with the
object of sharing profits.
v) Business being carried out by all or by any of them acting
for all.
Agreement of partnership:
The
agreement may be in writing or oral.
Due
to various other provisions and practically also it is advisable
that the agreement of Partnership is in writing. Such an agreement
must fulfil the basic requirements of a valid contract,
as required by the Contract Act. Therefore, a minor or a lunatic
cannot enter into a partnership agreement though by virtue of
the provisions of the Partnership Act a minor can be admitted
only to the benefits of the partnership.
Period of partnership
:
A
partnership can be for
Ø a fixed period of time or
Ø it
may be for a duration at the will of the partners as provided
U/S 7
Ø it may be limited to a particular adventure as provided
U/S 8 or
Partnership at Will
In
such partnership a partner can retire from the firm or dissolve
it whenever he thinks proper by merely giving a notice in writing
to the other partners of his intention.
Partnership for an adventure
:
In
such partnership parties undertake no liability beyond the
limit of a particular adventure/undertaking/business.
RELATIONS OF PARTNERS TO THIRD PARTIES
18. Partner to be agent of the firm
Subject
to the provisions of this Act a partner is the agent of the
firm for the purpose of the business of the firm.
19. Implied authority of partner as agent of the firm
(1) Subject to the provisions of section 22 the act of a partner
which is done to carry on in the usual way business of the
kind carried on by the firm binds the firm.
The authority of a partner to bind the firm conferred by this
section is called his "implied authority".
(2) In the absence of any usage or custom of trade to the
contrary the implied authority of a partner does not empower
him to -
(a) submit a dispute relating to the business of the firm
to arbitration
(b) open a banking account on behalf of the firm in him own
name
(c) compromise or relinquish any claim or portion of a claim
by the firm
(d) withdraw a suit or proceeding filed on behalf of the firm
(e)
admit any liability in a suit or proceeding against the firm
(f) acquire immovable property on behalf of the firm
(g) transfer immovable property belonging to the firm or
(h) enter into partnership on behalf of the firm.
Liability of Partners
and Firm
Even
partner is jointly and severely liable for all acts of the firm
done while he is a partner and his liability is unlimited.
REGISTRATION
OF FIRM:
58. Application for registration
(1) The registration of a firm may be effected at any time by
sending by post or delivering to the Registrar of the area in
which any place of business of the firm is situated or proposed
to be situated a statement in the prescribed form and accompanied
by the prescribed fee stating -
(a) the firm name
(b) the place or principal place of business of the firm
(c) the names of any other places where the firm carries on
business
(d) the date when each partner jointed the firm
(e) the names in full and permanent addresses of the partners
and
(f) the duration of the firm.
The statement shall be signed by all the partners or by their
agents specially authorised in this behalf.
(2) Each person signing the statement shall also verify it in
the manner prescribed.
(3) A firm name shall not contain any of the following words,
namely
"Crown", "Emperor", "Empress","Empire",
"Imperial", "King", "Queen", "Royal"
or words expressing or implying the sanction approval or patronage
of Government except when the State Government signifies its
consent to the use of such words as part of the firm name by
order in writing.
Effect of non-registration
S/69 interalia provides that:
(1) No suit to enforce a right arising from a contract or conferred
by this Act shall be instituted in any court by or on behalf
of any person suing as a partner in a firm against the firm
or any person alleged to be or to have been a partner in the
firm unless the firm is registered and the person suing is or
has been shown in the register of firms as a partner in the
firm.
(2) No suit to enforce a right arising from a contract shall
be instituted in any court by or on behalf of a firm against
any third party unless the firm is registered and the persons
suing are or have been shown in the register of firms as partners
in the firm.
|
SOME
FEATURES OF PARTNERSHIP
|
| Ø
It
is governed by The Indian Partnership Act 1932. |
| Ø It is a mutual agreement between two or more persons
to share the profits of a business carried on by all or
any of them acting for all. |
| Ø It is not compulsory to register the Firm with Registrar
of Firms but practical to register the firm. |
| Ø Firm is not a separate legal entity. It is not distinct
from it's partners. |
| Ø Creditors of the firm can recover their dues from any
or all the partners . |
| Ø Partner's liability is unlimited. |
| Ø
A
partner may retire as provided in S/32 |
| Ø A partner can be expelled as provided in S/33 |
|
Ø
A
firm may be dissolved with the consent of all the partners
or in accordance with a contract between the partners
as U/S 40.
|
| Ø
Compulsory
dissolved U/S 41. |
| Ø Dissolution on the happening of certain contingencies
U/S 42 |
| Ø
Dissolution
by notice of partnership at will U/S 43 |
| Ø
Dissolution
by the court U/S 44 |
| Ø A partner's share in the firm is not transferable. |
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© Zarana
Khona 2000 email: zarana@indiaitlaw.com
