In the partnership firm partners are the key personals. They are the ones who have authority regarding taking every decision with respect to partnership firms. Without having a minimum of two partners, Partnership Firm Registration is impossible. There are various rights and duties of partners in a partnership firm. All the partners of the partnership firm must be aware about these rights and duties so that they can fulfill the same. They have been prescribed under the Partnership Act of 1932. If you are having a business in partnership you must be aware about these rights and duties of partners in a partnership firm. Awareness is necessary hence we came up with the current write-up. This will help you out to know about the various rights as well as duties of partners in a partnership firm.
What is a Partnership Firm?
Under Section 4 of the Partnership Act of 1932, word partnership has been described as association of individuals for any kind of business. They must have at least two partners. There are various rights and duties of partners in a partnership firm. All the partners must be aware about the key rights and duties of partners in a partnership firm. This kind of entity has been governed by the Partnership Act of 1932. All the partners are the agent of each other in a partnership firm, hence they are liable for one another’s act.
Partnership firms do not have separate legal entities. They are associated with their partners. All the major decisions have been taken by the partners in a partnership firm. These entities are suitable for those businesses which are working in a particular locality and which do not have any plan of expansion. Its registration process is also very simple, even its registration is not even mandatory.
Partnership Firms are the traditional kind of entity. These firms are very popular in the traditional time but nowadays people prefer to do Limited Liability Partnership Firm Registration over partnership firms. This is because LLP offers all the benefits of a corporate body. This is an evolved version of partnership firms. It has the quality of both the corporate body and partnership firm.
Rights of Partners in a Partnership Firm
Out of the various rights and duties of partners in a partnership firm, some of the key rights has been given below:
Right to Take Part in the Conduct of the Business: Section 12(a)
All the partners in a partnership firm have the right to take part in the conduct of the partnership firm. Every decision of the partnership firm and its conduct must be taken mutually by all the partners of the firm. Section 12(a) also talks about the same right of the partners. This is because in a partnership firm all the things are in the hands of the partners hence they must be involved in all the activities including the conduct of the business.
Right to be Consulted: Section 12(c)
A majority of the partners may decide on any disagreement emerging on routine business matters. Each partner will have the opportunity to voice his or her opinion prior to the decision being made. However, no changes may be made to the nature of the company without every partner’s approval. This makes the work of the partnership firm easy and also helps in solving the disagreements easily. This indirectly supports the functioning of the partnership firm.
Right to Access Books: Section 12(d)
As mentioned before, all the partners are the true owner of the partnership firms, hence they have all the rights to do whatever necessary for the benefit of the firm. Books of the firm are also necessary to keep and maintain for the well-being of the partnership firm. Hence it is not the duty of one or two partners but of all the partners to maintain them. For the same all the partners have access to the books of the partnership firm.
Right to Remuneration: Section 13(a)
As the partners in a partnership firm are part of the partnership firm in particular shares. They are eligible to get this share only. They cannot take any kind of remuneration for the business conduct of the partnership firm. This provision of section 13(a) of the Partnership Act of 1932 enables partners to get remunerations but sometimes it may vary due to the mutual agreement.
Right to Share Profit: Section 13(b)
All the partners having equal rights on the profit of the partnership firm. Equal right here means right on the profit as per their shares in the Partnership Firm. Just like profit, all the partners have to bear the losses as well. This is because partnership firms are not having separate legal entities. Partners are solely responsible for the business of the Partnership firms hence their profit and loss also lies on the partners only.
Interest on Capital and Advances: Section 13(c)
Generally interest on the capital which has been subscribed by the partner in the firm is not allowed. But if an agreement regarding the same has been there then in such case it will be allowed to take interest on the capital. Hence if any partner brought capital to the Partnership Firm and wants to take interest on the same then there must be an agreement regarding the same. Concept of interest on capital has been mentioned under section 13(c) of the act.
Interest on Advances: Section 13(d)
Similarly there is another concept that is interest in advances, which has been given under section 13(d) of the act. As per this provision of the Partnership Act, a partner can take interest on the capital which he brought as advance to the firm. This is like a loan on a partnership firm which must be paid with interest. Here a partner can take interest up to 6% per annum.
Right to Indemnified: Section 13(e)
In case of emergency or in any other situation if any partner has done something for the interest of the partnership firm, he or she must be identified by the firm for the same. This is for the interest of the partners and for the interest of the firm itself. If there is no provision of the indemnification then no partner would like to invest in the partnership firm during the time of emergency.
Admission of New Partner: Section 31
In the existing Partnership Firm, any new partner cannot be added without obtaining permission of all the partners. In case if any new person wants to join the firm as a partner or any one of the partners wants to add a new partner in the firm, then it cannot happen without the consent of all the partners. This is because all the partners are equally part of the firm, hence decisions must be taken mutually. One single partner cannot take decisions regarding anything related to the firm.
Right to retire
Out of the various rights and duties of partners in a partnership firm, the right to retire is one. It has been mentioned under section 32(1) of the Partnership Act of 1932. As per this section every partner of the partnership firm has the right to retire from the partnership in the firm. Those who want to retire must take consent of the other partners. Also retirement must be taken after giving proper notice to the other partners.
Right Against Expulsion: Section 33
All the partners in a partnership firm have equal rights in the firm. Any of the partners cannot be expelled from the partnership firm by the majority. This is an ill practice and there are chances of discrimination as well. Only in a few situations is it possible. Such situations are mentioned below:
- There is an agreement of the same
- There is an advantage of the same to the firm
- The decision has been taken in good faith
Duties of Partners in a Partnership Firm
Out of the various rights and duties of partners in a partnership firm, some of the key duties of the partners has been given below:
- As per section 9 of the act, all the partners must do the business of the partnership for the best advancement of the firm
- Under section 10 all the partners are liable to indemnify the firm if any fraud has been done with the firm due to which it has faced losses
- Also for the willful negligence partnership firm must be identify as per section 13(f) of the firm
- All the partners must fulfill their duties without any remuneration
- To indemnify the firm in case of fraud
Conclusion
Most people think that running a Partnership firm is very easy, but it’s not like that. There are lots of rights and duties of partners in a partnership firm. All the partners must be aware about their rights and duties regarding the partnership firm, so that they can be fulfilled easily by them. It’s not child play to run any kind of business. Although such entities are not having hectic compliances like corporate bodies does not mean anybody can run them. In such businesses which are running on the basis of one agreement, there are a lot of chances of disagreements. Hence to cure all those disagreements it is essential for all the key personnels to know about the rights and duties of partners in a partnership firm. This makes it easy to understand how the decisions will be made and to what extent in a partnership firms barbers can be involved.
