Question

Why is a new partner is admitted? (Answer in one sentence)

Answer 1

When a company requires additional capital or managerial assistance or both a new partner may be admitted to complement its existing resources in order to grow its business.

• Under the Partnership Act 1932, a new partner may only be admitted to the partnership with the agreement of all current partners, unless decided otherwise.
• The partner brings an agreed amount of capital either in cash or in kind to the right to gain share in the partnership firm's wealth and profits.
• When a company requires additional capital or managerial assistance or both may be admitted to a new partner to complement its existing resources in order to grow its business.