Video instructions and help with filling out and completing Why Form 2220 Partnership

Instructions and Help about Why Form 2220 Partnership

Partnership as a form of business and it's essential aspects meet mr. a he is a young man from Chandni Chowk who makes a living by selling hand-woven saris he always dreams of owning a departmental store one day where he can sell designer watches Footwear and stylish accessories although he has the experience of selling he lacks land and the required funds meet mr. B he is a middle-aged person from Delhi having a flourishing business and also a number of shops in the prime areas of Delhi he always dreams of generating revenue from his additional shops over and above his normal business income although he has the land he is running short of time for additional businesses meet mr. C he is a young and ambitious man who has recently attained his master's degree he has an excellent command over his speech and has a very good network of business associates he always dreams of making it big with the help of his marketing and networking talents although he has the skills he is short of funds meet mr. d he is an experienced person with enough extra funds at his disposal he has excellent financial acumen he dreams of earning more interest on his idle funds than that offered by the banks although he has the funds he has no time all of them mutually agreed to start a business to achieve a common goal that is to earn profits they enter into an agreement stating various terms and conditions to carry on business they have formed a partnership firm let us take this example and understand further about the various aspects of a partnership firm what is partnership as per Section 4 of the Indian Partnership Act 1932 partnership is defined as relation between persons who have agreed to share the profits of a business carried on by all or anyone of them acting for all the essential features of a partnership there should be at least two persons to form a partnership partnership is the result of an agreement the agreement should be for carrying on some legal business sharing of profits and losses which means joining hands to carry on a charitable activity will not be a partnership relationship of mutual agency between the partners a partnership agreement can be oral or in writing but wherever it is in writing the document which contains the terms of the agreement is called partnership deed contents of the partnership deed names and addresses of the firm and its main business names and addresses of all partners amount of capital to be contributed by each partner the accounting period of the firm the date of commencement of partnership rules regarding operation of bank accounts profit and loss sharing ratio rate of interest on capital loan drawings etc mode of auditors appointment if any salaries Commission etc if payable to any partner the rights duties and liabilities of each partner treatment of loss arising from insolvency of one or more partners settlement of accounts on dissolution of the firm method of settlement of disputes among the partners rules to be followed in case of admission retirement or death of a partner and any other matter relating to the conduct of business but what happens if the partnership deed does not contain information on any matter related to business in case the partnership deal is silent on any matter related to business the provisions of the Indian Partnership Act 1932 shall apply important provisions of the Indian Partnership Act 1932 profit sharing ratio if the partnership deed is silent about the profit sharing ratio the profits and losses of the firm are to be shared equally by partners irrespective of their capital contribution in the firm interest on capital no partner is entitled to claim any interest on the amount of capital contributed by him in the firm as a matter of right in case the deed provides for payment of interest on capital but does not specify the rate interest will be paid at the rate of 6 percent per annum interest is payable only out of the profits of the business and not if the firm incurs losses during the period interest on drawings if there is no mention in the deed no interest is to be charged on drawings made by the partners interest on advances if any partner has advanced some money to the firm for the purpose of business beyond the amount of his capital he shall be entitled to get an interest on the amount at the rate of 6 percent per annum remuneration for firms work unless there is a provision in the partnership deed no partner is entitled to get a salary or other remuneration for taking part in the conduct of the firm's business wait there's more the Indian Partnership Act goes on to address an important issue if a partner obtains any profit for him or herself from any transaction of the firm or by using the property or business connection of the firm or the firm name he or she shall account for the profit and pay it to the firm if a partner carries on any business of the same nature as and competing to that of the firm he or she shall account for and pay to the firm all profit made by him or her in that business space-age stalls so that brings us to the end of this discussion on partnership remember many hands make light work and that's exactly what partnership is all about you