2024 Best latest Article - Kinds of Partnership in Business

2024 Best latest Article – Kinds of Partnership in Business

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Different kinds of partnership may be explained as follows:

Kinds of Partnership in Business

1. General Partnership: In this type of partnership the liability of members is unlimited. All the partners personally and collectively are liable for the obligations of the firm. All partners can take part in the working of the business. In India, this kind of partnership exists. The registration of the firm is not compulsory but certain privileges are available to the firm which is registered.

(a) Particular Partnership. When a partnership is started for certain work it is called particular partnership. When the work is completed the partnership comes to an end. The partnership may also be for a limited period. It will be dissolved at the expiry of that period.

2024 Best latest Article - Kinds of Partnership in Business
Kinds of Partnership

(3) Partnership-as-Will. This type of partnership is neither for a fixed period nor for a particular purpose. The partnership-at-will continues up to the time the partners have faith in each other.

The life of partnership is not limited by time and work. It can be dissolved when all the partners want dissolution or any one of the partners gives notice for dissolution of the firm. The strength of this partnership depends upon the mutual trust and confidence among the partners.

II. Limited Partnership

In general partnership, the liability of partners is unlimited. This discourages those persona who want to invest money in business but do not want to risk their private property. These persons can risk their investments in the firm but not beyond. The limited partnership provides them an opportunity for investment. In limited partnership the liability of some partners is limited while lability of some partners is unlimited.

The partners with limited liability are called special partners while those with unlimited liability are called general or active partners. The liability of special partners is limited only to their capital in the business while liability of general partners can go beyond their capital. The limited partnership is not prevalent in India and is not allowed under Partnership Act. This kind of partnership is prevalent in U.S.A. and several European countries.

Features of Limited Partnership – kinds of partnership

Features of Limited Partnership my study level

The following are the main features of limited partnership:

1. There are two classes of shares in limited partnership, le special and general partners. There must be at least one general partner whose liability will be unlimited and at least one partner should be a special partner with limited liability.

2. A special partner only invests money but cannot take active part in the business. The day- to-day work is done by general partners only. The special partner, however, can inspect the books of accounts.

3. The special partners cannot bind the firm or other partners by their acts.

4. The limited partnership is registered under acts in different countries. This is done in provide information to the public about the capital contributed by special partners and the extent of their lability. Now registration of the firm makes it liable to be treated as general partnership.

5. A special partner cannot withdraw any part of his capital from the firm, otherwise he will make his liability unlimited to the extent of amount withdrawn.

6. The bankruptcy, death or launacy of a special partner does not dissolve the firm.

7. A special partner has to bring his capital in cash. 

8. A special partner has a right to inspect the books of the firm

The limited partnership resembles to the Hindu Undivided Family in India where the lability of the Karta is unlimited in ILU F. the liability of coparceners (other members) is limited to the share in the family business while Karta is like a general partner.

Distinction between General Partnership and Limited Partnership – kinds of partnership

Distinction between General Partnership and Limited Partnership

The following points of distribution between general and limited partnerships are given: 

General Partnership Limited Partnership
1.       Liability Liability of all partners is unlimited. They are individually and collectively responsible for the liabilities of the firm. The liability of special partners is limited to their capital in the business where liability of general partners is unlimited.
2. Participation work All partners take active part in the working of the firm.  Only active partners can participate in management. Special partners can only inspect books of accounts and can only make suggestions to the general partners.
3. Representation of firm All partners can represent the firm. They can bind the firm by their acts. Only active or general partners can act on behalf of the firm. Special partners cannot bind the firm by their acts.
4. Registration Registration of general partnership is not compulsory However; there are some benefits of registration. Registration is compulsory for limited partnership. The purpose of registration is to let others know about the liability of special partners.
5. Stability The death, lunacy or bankruptcy of a partner dissolves the firm. This partnership is more stable than general partnership because death, lunacy or bankruptcy of special partners does not dissolve the firm.
6. Cred-worhinees The creditworthiness of general partnership is more because the liability of all partners is unlimited. The lenders will keep the private properties in mind while extending credit to the firm.  As compared to general partnership the creditworthiness of limited partnership is less because the liability of special partners is limited.
7. Capital In general partnership a partner is not required to bring capital in cash. A special partner has to bring his capital only in cash.
8. Recovery of debts  In general partnership recovery of debts is more sure because liability of all partners is unlimited.

 

Since special partners are not personally liable for the business debts their recovery is comparatively less sure.

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