PRODUCTION & OPERATIONS MANAGEMENT GROUP #09 17460920-073 Muhammad Aizaz Ali 17460920-118 Aqib Adnan 17460920-145 Umar Farooq 17460920-007 Waqas Sarwar GROUP MEMBERS – BBA 6TH – SECTION A PARTNERSHIP WHAT IS PARTNERSHIP ? A partnership is a legal form of business with two or more owners. According to S.E. Thomas, “A partnership is an association of people who carry on business together for the purpose of making profit”. ESSENTIAL ELEMENTS OF A PARTNERSHIP Plurality of members: More than one person involve with the formation of partnership business. Contractual relation: The relationship of partners depends on contract among them. Legal business: The business must be legal in the eye of law. Two or more than two persons involve with the illegal business is not a partnership. ESSENTIAL ELEMENTS OF A PARTNERSHIP Lawful business: The partnership business which must be legal in the eye of law. Earning and sharing profit: The profit which is earned from the partnership business must be shared among the partners according to the predetermine ratio. ESSENTIAL ELEMENTS OF A PARTNERSHIP Mutual organization: This is the mutual organization where each and every member freely involves with the business. Mutual confidence and trust: Partnership business formed depends on mutual trust and confidence. ADVANTAGES OF PARTNERSHIP More Financial Resources Two or more people pool their money and credit. Shared Management and Pooled/Complementary Knowledge Partners provide different skills and perspectives. ADVANTAGES OF PARTNERSHIP Longer Survival Partners are four times as likely to succeed as sole proprietorships. No Special Taxes All profits of partners are taxed as personal income of the owners. DISADVANTAGES OF PARTNERSHIP Unlimited Liability Each general partner is liable for the debts of the firm, no matter who was responsible for causing those debts. You are liable for your partners' mistakes as well as your own. Division of Profits Sharing profits can cause conflicts. DISADVANTAGES OF PARTNERSHIP Disagreement Among Partners Disagreements can arise over division of authority, purchasing decisions, and so on. Because of such potential conflicts, all terms of partnership should be spelled out in writing to protect all parties. Difficult to Terminate For example: Who gets what and what happens next? TYPES OF PARTNERSHIP General Partnership A partnership in which all owners share in operating the business and in assuming liability for the business debts. Limited Partnership A partnership with one or more general partners and one or more limited partners. TYPES OF PARTNERSHIP Master Limited Partnership (MLP) A partnership that looks much like a corporation (in that it acts like a corporation and is traded on a stock exchange) but is taxed like a partnership and thus avoids the corporate income tax. Limited Liability Partnership (LLP) A partnership that limits partners' risk of losing their personal assets to only their own acts and omissions and the acts and omissions of the people under their supervision. CLASSIFICATION OF PARTNERS By viewing of nature, work, right, duties and responsibilities, the partners may classify into the following ways: Active partner The active partner those partners who actively take part in the management and administrative activities of the business. Dormant or sleeping partner The sleeping partners who are not actively take part in the management and administrative activities of the business. CLASSIFICATION OF PARTNERS Limited partner A limited partner is a partner whose liability is limited to the amount that he paid to the business. Quasi partner A quasi partner is a partner who has withdrawal his capital but keep it as a loan to the business. He will get interest on his loan. WHO CAN OR CANNOT BE A PARTNER ? Who can be? Any person who is qualified to make a contract can be a partner of a partnership business. Who can not be a partner? A minor A man of unsound mind Mentally sick person Insolvent person MINOR AS A PARTNER Generally, minor can not be a partner. But it a partner is dead, his/her sons or daughters can be partners of the business. They can enjoy the facilities and profits. But as they are minors, they do not need to bear the responsibilities of the business. RIGHTS OF PARTNER Interest on loan Right to work as an agent Right to introduce Right to retirement Right of not being expelled Right in respect of winding up of a firm RIGHTS OF PARTNER Participation in the conducting of business Right of expressing opinion Right to observe, inspect and taking copy of the documents Claiming remuneration Right of obtaining profit Profit on capital DUTIES OF PARTNER Fulfillment of duties with diligence No claim of remuneration Proportionate bearing of loss Compensation of loss occurred by willful neglect DUTIES OF PARTNER Surrender of profit earned from the competitive business Performing the functions within the authority Bearing unlimited liability PARTNERSHIP DEED/AGREEMENT The partnership deed or agreement refers to a document where all necessary terms and conditions are written. It is a written declaration of agreement among the partners. Oxford dictionary of business, “Deed of partnership is a partnership agreement drawn up in the form of a deed” Professor J.L. Hanson, “Deed of partnership is a document drawn up to clarify the respective positions of the partners in a business”. CONTENTS OF A PARTNERSHIP DEED/AGREEMENT Deed/agreement is the guideline for conducting partnership business. All types of terms and conditions must be included in the partnership deed. Sound and smooth business operations demand that partnership agreement should be written and signed. This is not a legal binding but a moral requirement. Such a contractual written agreement is termed as ‘Articles of partnership’. Written agreement reduces the misunderstanding. CONTENTS OF A PARTNERSHIP DEED/AGREEMENT Written articles of agreement include the followings: Name of the partnership business. Types of business to be done. Location of the business. Expected life of the partnership. Names of the partners Amount of investment by each partner. Provision for taking loan for the different sources. Rate interest on debt and loan. Amount of salary to be provided to the active partner. The address of the bank, where the bank account will be open. CONTENTS OF A PARTNERSHIP DEED/AGREEMENT Procedures of distributing profits and covering the losses. Amounts those partners will withdraw for services. Procedures for withdrawal of funds. Provision for evaluating goodwill of the business. Duties of each partner. Procedures to hire in case of death or absent. Procedures of running the business. Provision for changing the partnership deed. Procedures for dissolving the partnerships. Provision for evaluating asset and liabilities through dissolution of partnership business. REGISTRATION OF A PARTNERSHIP BUSINESS Registration is a task of listing name of the business in the registration office. Actually registration of partnership means the registration of partnership deed. According to the Partnership Act , Section-58 (1) , registration is not compulsory but encourages doing it. REGISTRATION OF A PARTNERSHIP BUSINESS The contents of an application form for registration are as follows: Name of the partnership business Location of the business. Objectives of the business. Name, address and profession of the partners Amount of investment by each partner. Date of joining the partners. Starting date of partnership business. CONSEQUENCES OF NON-REGISTRATION Case to the other partners Case to the third party Recovery of credit sales Arbitration is not possible Chance of quickly dissolution Cheating with other partners DISSOLUTION OF A PARTNERSHIP BUSINESS Dissolution of partnership may occur when one of the partners want to cancel the contract or according to the deed. Dissolution is distinct from the termination of partnership and the ‘Winding up’ of partnership business. DISSOLUTION OF A PARTNERSHIP BUSINESS There are various methods of dissolution: Dissolution by agreement According to the Partnership Act, section-41, by consent of all the partners of business, it will be resolved any time which was written in the partnership deed. Compulsory dissolution According to the Partnership Act, section-41, the compulsory dissolution take place under the following circumstances: By the happening of an event which makes it unlawful for the business. By the adjudication of all the partners or of all the partners but one as insolvent. DISSOLUTION OF A PARTNERSHIP BUSINESS Dissolution due to the happening of certain contingencies According to the Partnership Act, section-42, dissolution under the following circumstances: When the partnership for a certain period of time, the partnership business will dissolution after end of the period. By the retirement of a partner to business will be dissolved if there is no agreement to the contrary. By the death of one or more of the partners, unless there is a contract to the contrary. The completion of a particular adventure. DISSOLUTION OF A PARTNERSHIP BUSINESS Dissolution by notice According to the Partnership Act, section-42, the partnership business be resolve by giving notice to other partner. Dissolution by the court In case, any partner give complain against one or more of his co-partner, the court may dissolve the partnership on any of the following grounds: If a partner becomes imbalance. If a partner becomes permanently incapable of doing work. If a partner frequently break of the partnership agreement. If a partner has transferred the whole or part of his interest to a third party, which is not lawful. THANK YOU!
