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The concept of a partnership firm in India comes under the Indian Partnership Act of 1932. The Act describes the duties and rights of the partners and legal compliance between third parties and partners that are part of the configuration of a partnership. In simple words, the respective Act incorporates the status of partners and partnership firms along with third party and agreement relation in the context business of a partnership.
A partnership is a contractual connection between individuals who have accepted to distribute the profits of the business obtained on by everyone involved in all, as described in Section 4 of the Indian Partnership Act. Three important components of the Partnership are as follows:
A partnership is a contract between two or more individuals
The contact must be prepared to share the profits carried away from the business
The organization or business must be handled or managed by everyone or anyone of them representing all
All the above conditions must be followed before form a partnership firm
People who are involved in the Partnership with each other are known as partners individually. The partners might be addressed jointly under the business name or name of the firm. A partnership is a legal contract between the partners, whereas a firm is tangible entities suggestive of the joint body of all the partners. Hence a partnership is an unseen relation that connects partners and firms is an observable appearance of the Partnership; that is why both partners and firms complement each other.
Two types of Partnership described below
If an individual becomes a partner with another person in a specific business organization or for a particular business venture or collaboration like road construction, railway line construction, etc., is called a particular partnership. This type of Partnership completes its terms when the project gets finished.
There is no condition kept in the agreement between the partners for the duration of their Partnership, and it is known as Partnership at will.
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