Requirements to be a Partner
A partnership firm is a form of business in which a group of people, also known as partners, come together. They set up their firm and provide services and products through it. However, a partnership firm is not considered to be a separate legal entity. Partners share all the profit and losses amongst each other. There is an unlimited liability given to all the partners. It is considered to be the main disadvantage of this kind of business. There is a contract (Partnership Deed) stating the consent of all the partners in a partnership firm. It states the manner in which profits and losses will be shared among the partners. A maximum number of partners in a partnership firm is twenty according to the Partnership Act, 1932. A partnership between two companies can also be formed. However, it can be done only if authorized by the MoA (Memorandum of Association). A partnership is formed through a contract and not status. To become a partner in a partnership firm you will require certain things as mentioned below.
To become a partner you need to be a major and should be of sound mind. You should not be disqualified from contracting in any way by the law. However a minor can also become a partner. In such a case scenario, all the partners should give their consent. The minor won’t be able to participate in the workings, however, he will be entitled to the benefits of a partnership. He is personally not liable for any act. He cannot sue other partners anyhow.
The following can enter into a partnership by law:
- An Individual
- A firm (which is recognized as a separate legal entity by law)
- A company
- A Trustee
- The main member (Karta) of a Hindu Undivided Family
There are six kinds of partner you will find in a partnership firm:
- Active or Managing Partners
- Dormant or Sleeping Partners
- Nominal Partners
- Partners in profits only
- Minor Partners
- Other Partners
As the name suggests Active partner is the one who is present in the workings of the partnership in every step. He plays the most crucial role and is majorly responsible for all the workings. A Sleeping partner is one who does not participate actively in the proceedings of the partnership. They are not known to the public. They work in the background. A Nominal partner is a partner by name only. That is he plays no part in the workings of the firm. He is not interested in workings nor he shares the profit. A partner in profits is when a partner is entitled to only the profits as agreed by all the other partners. He is not liable to any kind of losses. A minor partner is one who is below eighteen years of age and is entitled to the benefits of the partnership only. There are restrictions like he cannot participate or intervene in the workings of the firm. Other partners generally include silent partners. They don’t want to be known to the outside world. They sit back and work.
So, we can conclude by saying that partnership firm, even though is not a separate legal entity, is still registered by following certain rules. The partners need to be sure of their eligibility and nature in which they will work. A partnership deed should be established. We, at LegalRaasta, can help you register partnership firm.