A partnership is a relation between two or more persons consenting to share the profit/loss of the business operated by one or more persons acting for all. The persons who are involved in the partnership are individually known as ‘Partners’.
The partners, in the partnership, enter into a partnership deed which generally describes all the rights and responsibilities of partners. According to the partnership deed drafted between the partners, the provisions of the Indian Partnership Act, 1932 also describe certain general rights and responsibilities of partners.
Rights of the partners
1. Taking part in the operation of the business
Subject to the clause in the deed of partnership firm registration, every partner has a right to take part in the operation of the business.
2. Expressing opinion
In the case of disputes in the ordinary matters connected with the business, such difference can be resolved by the majority of the partners.
Every partner has the right to express their opinion before solving such a disputed matter. It is compulsory to get the consent of all the partners to do any change in the nature of the business.
3. Sharing profits
One of the core rights of partners is to equally share the profit as well loss (if mentioned in the deed). Sometimes, the profit/loss sharing ratio is not described in the partnership deed. In those cases, the partners can share equal profits and share equally the sustained losses.
4. Accessing the books of accounts
Every partner has the right to get included in accounting and bookkeeping as well. Such rights let them access, inspect, and take a copy of the books of accounts and financial statements, i.e. trial balance, loss & profit account, and balance sheet of the firm.
5. Earning interest on capital
Usually, partners don’t have any right to earn interest on the capital invested by them. However, in case they decide to avail of the interest benefit, then, such interest payment can be made only out of the profits of the firm i.e. in case of loss, interest to partners is not allowed.
6. Indemnification rights
The partners have the right to be remunerated for all the acts done by him/her in the course of the business and for all the expenses made by him/her in case of an emergency for preventing the interest of the firm.
8. Ownership of the firm’s property
In the absence of any specific contract/deed, each partner is the owner of the firm’s property.
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Responsibilities of partners
1. Rendering full information and true accounts
It is the responsibility of the partner to provide true accounts and also to give full information.
2. Looking after any loss caused by the fraud
If there is any loss to the firm or to any of the partners of the firm on account of fraud by a partner in the operation of the firm’s business. In that case, the partner is bound to pay the firm or the partners for the loss so involved.
3. Working for a maximum common interest
It is the most important duty of every partner to run the business for the maximum common interest of the partners.
4. Being responsible for any personal profits earned by the partners
If partners get any profits from any transactions of the firm or get profit from the use of the business connections or property of the firm’s name, then, the partner is answerable to account for such personal profits and is required to handover it to the firm.