A partnership arises whenever two or more people co-own a business and share in the profits and losses of the business. There are relatively five types of Partnership such as Partnership at will, Partnership for a particular venture, Partnership for a fixed period, Ordinary Partnership and Limited Partnership. Explanation about all these five Types of Partnership is given below.
Kinds or Types of Partnership
(1) Partnership at will – If the duration of the partnership has not been defined in the contract, and any partner can opt out when he so desires, it is deemed to be a partnership at will. According to Section 7 of the Indian Partnership Act, if the partners can terminate the partnership at any time at their will, such partnership is called ‘partnership at will’.
(2) Partnership for a particular venture – According to Section 8 of the Partnership Act, the partners engaged in ‘a particular business’ comprises a partnership for a particular venture. For example, two persons jointly take up a contract to construct a building. The contract is for a particular venture, and the moment the construction of the building is complete, the contract terminates, because the contract was made for a particular venture and expires with its completion.
(3) Partnership for a fixed period – If the partners make the contract for a fixed period, the contract is valid only for the specified period. For example, two hoteliers make a contract to provide hotel facilities to the visitors to an exhibition in Delhi which is for a period to two months and share the profit. The contract of partnership, in such case, would be for the fixed period of the duration of the exhibition, and would terminate when the exhibition is over.
(4) Ordinary partnership – A partnership made under the provisions of the Partnership Act, 1932 is deemed to be an ordinary partnership. Such partnership is the practice in India.
(5) Limited partnership – Where the liability of some partners is limited to their investment in the business, it is known as a limited partnership. Such partnership is entered into by such persons who are not interested in actively participating in running the business and do not want to assume any liability besides what they have invested in the business. The English Limited Partnership Act, 1907 defines a limited partnership as a partnership in which there is one or more than one person whose liability is not limited and also one or more than one person whose liability is limited to their investment in the business. Such type of partnership is not in practice in India.
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