A partnership between two people is when they run a business together with the intention of sharing the profits amongst themselves. However, there can be various types of partnerships according to their duration or the intent of their creation. Let us take a look at the kinds of partnerships like a general partnership, partnership at will etc.
Browse more Topics under The Indian Partnership Act
- True Test of Partnership
- Elements of a Partnership
- Types of Partners
- Relation of Partners to One Another
- Relation of Partners to Third Parties
- Partnership Property
- Minors admitted to Benefits of partnership
- Rights of Outgoing Partner
- Legal Consequences of Admission or Retirement of a Partner
- Consequences of Non-Registration of Firm
- Dissolution of a Firm
- Consequences of Dissolution of a Firm
Kinds of Partnership
The distinction between partnerships can be done on the basis of two criteria. They are as follows
- With Regard to the Duration of the partnership – either Partnership at Will or Partnership for Fixed Duration
- With regards to the extent of the business carried by the partnership – either General Partnership or Particular Partnership
So let us take a look at these kinds of partnership in some detail.
(Source: Asia Info Blog)
1] Partnership at Will
When forming a partnership if there is no clause about the expiration of such a partnership, we call it a partnership at will. According to Section 7 of the Indian Partnership Act 1932, there are two conditions to be fulfilled for a partnership to be a partnership at will. These are
- There is no agreement about a fixed period for the existence of a partnership.
- No provision with regards to the determination of a partnership
So if there is an agreement between the partners about the duration or the determination of the firm, this will not be a partnership at will. But if a partnership was entered into a fixed term and continues to operate beyond this term it will become a partnership at will from the expiration of this term.
2] Partnership for a Fixed Term
Now during the creation of a partnership, the partners may agree on the duration of this arrangement. This would mean the partnership was created for a fixed duration of time.
Hence such a partnership will not be a partnership at will, it will be a partnership for a fixed term. After the expiration of such a duration, the partnership shall also end.
However, there may be cases when the partners continue their business even after the expiration of the duration. They continue to share profits and there is an element of mutual agency. Then in such a case, the partnership will now be a partnership at will.
3] Particular Partnership
A partnership can be formed for carrying on continuous business, or it can be formed for one particular venture or undertaking. If the partnership is formed only to carry out one business venture or to complete one undertaking such a partnership is known as a particular partnership.
After the completion of the said venture or activity, the partnership will be dissolved. However, the partners can come to an agreement to continue the said partnership. But in the absence of this, the partnership ends when the task is complete.
4] General Partnership
When the purpose for the formation of the partnership is to carry out the business, in general, it is said to be a general partnership.
Unlike a particular partnership in a general partnership the scope of the business to be carried out is not defined. So all the partners will be liable for all the actions of the partnership.
Solved Question on Kinds of Partnership
Q: In a particular partnership the liabilities of the partners is only limited to the defined business undertaking. True or False?
Ans: This statement is True. In a limited liability, the partners are only liable for the liabilities arising out of the particular business venture for which the partnership was formed. Acts not relating to the said venture will not be liabilities of all the partners