A partnership is a term that leads to two people or a group of people signing a bond to share the profits, shares, responsibilities, losses, etc., with each other in a certain percentage of the overall figure.
There is a partnership act that states all the facts and rules about any partnership and everyone is expected to be aware of those and are obliged to follow them. All the rules and regulations are decided on the business front, and whoever is wanting to be a part of it must agree to all the terms and conditions applied. Partners are also expected to have common views and backgrounds, as it helps in maintaining a healthy relationship.
Important Factors in the Test of Partnership
The supreme court of justice has given out a set of essentials that the parties should consider before signing in for the partnership deed. Those essentials are listed below:
1. Mutual Agency – All the legal deeds and percentage decisions are supposed to be mutual and nobody is allowed to have a fair trade deal. Nobody is allowed to be treated favourably, the shares and percentages are decided mutually with everybody’s consent.
2. Profit Sharing – Neither of the partners is allowed to deny the offered percentage share, even when they hire any kind of legal party.
3. Agreement – It is a tangible document that has to be signed by both parties and is treated as the final paperwork to do any kind of business. It includes all the rules, issues, and concerns of the company.
4. Capital – Without the capital, a business partnership cannot even take place. The partners are not bound to put in an equal amount of capital, it is up to the parties and they get to decide the final percentage. But a certain amount of capital is compulsory.
5. Sub partnership – This phenomenon is helpful for people who like to invest in more than one company.
6. Subletting – This contract doesn’t hold much power because it is not considered by the Supreme Court.
7. Salary – The salary also plays an important role in a partnership. When the business fluctuates, the right amount of salary is to be decided as per the capital invested in the business.
This is all about how a partnership is formed and works. All these elements are the pillars for a successful and healthy partnership. The Indian partnership act 1932 may also help you get a detailed idea about the partnership.