Explain the terms and concept
partnership firm
Answers
Persons who have entered into partnership with one another to carry on a business are individually called “Partners“; collectively called as a “Partnership Firm”; and the name under which their business is carried on is called the “Firm Name” A partnership firm is not a separate legal entity distinct from its members.
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Answer:
Persons who have entered into partnership with one another to carry on a business are individually called “Partners“; collectively called as a “Partnership Firm”; and the name under which their business is carried on is called the “Firm Name”
Explanation:
A partnership firm is not a separate legal entity distinct from its members. It is merely a collective name given to the individuals composing it. Hence, unlike a company that has a separate legal entity distinct from its members, a firm cannot possess property or employ servants, neither it can be a debtor or a creditor. It cannot sue or be sued by others.
It is only for the sake of convenience that in commercial usage terms like “firm’s property”, “employee of the firm”, “suit against the firm” and so on are used, but in the eyes of the law that simply means “property of the partners”, “employees of the partners” and “a suit against the partners of that firm”.
All of 5 elements mentioned above must co-exist in order to constitute a partnership. If any of these is not present, there cannot be a partnership. These 5 essential elements of a partnership firm are explained below in detail.
1. Contract for Partnership
2. Maximum No. of Partners in a Partnership is 20
3. Carrying on of Business in a Partnership
4. Sharing of Profits
5. Mutual Agency in a Partnership
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