What kind of partnerships

The life of this type of partnership depends upon the will of partners. The partnership can be dissolved at the desire of any partner on giving a notice. This type of partnership is not for a fixed period or for during a particular fixed venture. Particular partnership is one which is formed to accomplish a particular project or to carry out an activity for a specified period of time.

It dissolves automatically at the expiry of fixed period or completion of project. For example, partnership done for construction of a dam or a road. General partnership is one in which liability of every partner is unlimited and every partner is entitled to take active part in management of the business.

Acts of each partner are binding on each other as well as on the firm. Registration of the firm is optional and existence of the firm is affected by death, insanity, insolvency or retirement of the partners.

Limited partnership is one in which liability of at least one partner is unlimited, whereas, rest of the partners may have limited liability. Such a partnership does not get terminated with the death, lunacy or insolvency of partners with limited liability. The limited partners do not enjoy the right of management and their acts do not bind the firm or the other partners.

Registration of such partnership is compulsory. There are different types of partnership which are classified on the basis of their duration and liability. Classification of partnership on the basis of duration takes into account the time duration for which a partnership firm has been formed. Based on duration, there may be two types of partnership:. When a partnership firm is formed to carry on business without specifying any period of time, it is known as partnership at will.

Such a firm may be dissolved if any partner serves a notice to the firm terminating his partnership. This type of partnership firm is constituted to undertake a specific project or venture. When this is over, the partnership comes to an end. For example, two or more persons may form a partnership firm to construct a building for the government. When the work of constructing the building is over, the partnership comes to an end. Classification of partnership on the basis of liability takes into account nature of liability of partners concerned, unlimited or limited.

Based on liability, partnership may be either general or limited partnership. In general partnership, liability of all partners is unlimited. The partners have the right to participate in management of the firm and their acts are binding on each other. Registration of partnership is optional. In case of death, insolvency or insanity of any partner, the partnership comes to an end. In the case of limited, partnership, there are two categories of partners: general partners and limited partners, also known as limited liability partners.

The main features of limited partnership are as follows:. The categorisation of partnership is done on the basis of two factors that is duration and liability:. On the basis of duration, partnership can be divided into two categories namely; Partnership at will and Particular Partnership.

On the basis of liability partnership is divided into two types namely; General Partnership and Limited Partnership. The various types of partnerships are described below:. Partnership at Will :. As the name suggests, this type of partnership exist on the will of the partners. Consequently it comes to an end as and when one or more partners express their desire to dissolve it by giving a notice. For example, Reena and Leena friends and they share many common interests.

Therefore, when Leena extends a partnership business proposal to her, Reena is little apprehensive. So they mutually decide to start the business with the condition, that it can be terminated whenever either of the partner wishes to do so.

In certain cases, a partnership is formed for a fixed duration of time say two years, five years and so on. Also, individuals or firms get into partnership agreement for pursuing a specific project s.

In both the above cases, the partnership gets automatically terminated either on the completion of the stipulated time period or completion of the project as the case may be. For example, Sara and Aryan wish to start a law firm jointly.

However, Sara shares with Aryan that she has plans to go abroad after three years to peruse a masters course in law. Therefore, their partnership can exist only for three years. The liability of partners is unlimited and joint.

All partners enjoy the right to participate in the management of the firm and their acts are binding on each other as well as on the firm. The registration of the partnership firm is not compulsory. The partnership comes to an end on the death, retirement, lunacy or insolvency of the partners.

The liability of all the partners is limited, except one of them whose liability is unlimited. The partners whose liability is limited do not have the rights to manage and control the business. Also their acts are not binding on other partners or the firm. The registration of the partnership firm is compulsory.

The partnership does not get terminated on the death, lunacy, retirement or death of the partners. Classification on the Basis of Duration :.

Nature — This partnership exists at the will of the partners. Dissolution — This partnership continues as long as the partners want. It is terminated when any partner gives a notice of dissolution. Nature — This partnership is formed for a specific period or to complete a particular project like construction of a flyover.

Dissolution — It is dissolved automatically when the purpose for which it was formed is fulfilled or when the period, for which it was formed, is over. Classification on the Basis of Liability :. Liability — In this partnership the liability of all partners is unlimited jointly and individually. Right to participate — All partners have the right to participate in the management of the firm.

Registration — Registration of the firm is not compulsory. Dissolution — The partnership ends with the death, lunacy, insolvency or retirement of the partner. Liability — In this partnership, the liability of at least one partner is unlimited whereas the other partners may have a limited liability.

Right to participate — The partners with limited liability do not enjoy the right to participate in the management of the firm.

Dissolution — The partnership is not terminated with death, lunacy or insolvency of any partner. In a general partnership, the liability of each partner is unlimited. An exception is made in the case of a minor partner whose liability is limited to the amount of his share in the capital and profits of the firm.

In India all partnership firms are general partnerships. Each partner of a general partnership is entitled to take active part in the management of the firm, unless otherwise decided by the other partners. In general partnership, the liabilities of all partners are unlimited.

But in limited partnership, the liability of at least one partner should be limited. It is mandatory to register such partnership. This form of partnership did not exist in India earlier. LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership. The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name.

The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP. Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity. It is a partnership formed for an indefinite period. The time period or the purpose of the firm is not mentioned at the time of its formation.

It can continue for any length of time depending upon the will of the partners. Tax requirements for both partners: taxes are reported and paid individually by both partners based on the share of profits each year much like a general partnership.

Limited Liability Partnership LLP : This kind of partnership is usually formed by professional businesses, such as law firms. A partnership agreement is a contract between business partners that outlines the purpose, responsibilities and terms of the business as well as capital each partner contributes. When you form a partnership with us, a sample partnership agreement is included in your formation package. Disclaimer :. Richmond School of Law. Accessed Aug. Cornell Legal Information Institute.

Small Business Administration. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads.

Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Table of Contents Expand.

Table of Contents. What is a Partnership? Considering Liability in Partnerships. General Partnership. Limited Partnership. Limited Liability Partnership. LLC or Partnership. Partnerships and Tax Issues. By Jean Murray. Learn about our editorial policies. Updated on September 17, Article Sources. Your Privacy Rights.