What is Partnership? State its essential elements. Distinguish between partnership and joint Hindu Family.
Find the answer to the mains question of the Law of Partnership only on Legal Bites.
Question: What is Partnership? State its essential elements. Distinguish between partnership and joint Hindu Family. [UPJS 2015]Find the answer to the mains question of the Law of Partnership only on Legal Bites. [What is Partnership? State its essential elements. Distinguish between partnership and joint Hindu Family.]A partnership is a legal relationship between two or more persons who agree to carry on a business together and share profits and losses. It is governed by the Indian...
Question: What is Partnership? State its essential elements. Distinguish between partnership and joint Hindu Family. [UPJS 2015]
Find the answer to the mains question of the Law of Partnership only on Legal Bites. [What is Partnership? State its essential elements. Distinguish between partnership and joint Hindu Family.]
A partnership is a legal relationship between two or more persons who agree to carry on a business together and share profits and losses. It is governed by the Indian Partnership Act, 1932. The primary objective of a partnership is to conduct a business for mutual benefit.
Essential Elements of a Partnership:
The essential elements that constitute a partnership are:
Agreement: There must be an agreement between the partners to carry on a business.
Business: The partnership must be formed for the purpose of carrying on a business (not just for social purposes).
Sharing of Profits and Losses: Partners must agree to share the profits and losses of the business in a specific manner.
Mutual Consent: All partners must agree to the terms of the partnership voluntarily.
Agency Relationship: In a partnership, each partner acts as an agent for the other, meaning the actions of one partner can legally bind the others.
Distinction between Partnership and Joint Hindu Family:
| Aspect | Partnership | Joint Hindu Family |
|---|
| Formation | Formed by an agreement between two or more persons. | Formed by the birth of a male child in a Hindu family or through ancestral property. |
| Legal Status | Governed by the Indian Partnership Act, 1932. | Governed by the Hindu Law (Mitakshara School or Dayabhaga School). |
| Object | Formation of the partnership is specifically for the purpose of carrying on a business. | Formation of the family is not for business, but for inheritance and management of family property. |
| Management | All partners have the right to participate in management. | The family head (Karta) manages the property and business of the family, though others may assist. |
| Liability | Partners have unlimited liability for the debts of the business. | In a Joint Hindu Family, the liability of members is limited to the property they own in the family. |
| Profit Sharing | Partners share profits and losses as per the partnership agreement. | Profits (if any) from the family business are shared by the members according to the Hindu Law, and there is no formal agreement like in partnership. |
| Succession | Partnership ends upon the death, bankruptcy, or insolvency of a partner unless otherwise agreed. | A Joint Hindu Family continues as long as the family exists, and members inherit property as per Hindu succession laws. |
| Membership | Membership is voluntary and based on agreement. | Membership is based on birth in the family, and every male member of the family is a part of it. |
In essence, while a partnership is a business arrangement based on mutual consent and sharing of profits and losses, a Joint Hindu Family is a more traditional family structure based on lineage and inheritance, typically with one person (the Karta) managing the family’s affairs.