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Partnership Act 2020
A partnership is a formal legal relationship where two or more individuals or entities collaborate to operate a business with the aim of sharing profits. The partners agree on certain terms and conditions to govern their business relationship, typically documented in a partnership agreement. This agreement outlines the rights, responsibilities, profit-sharing ratios, and decision-making powers of each partner.
Partnerships can be formed for various types of lawful businesses, including small businesses, professional firms (like law firms or accounting firms), or even larger enterprises.
Who are Partners?
Partners are the individuals or entities that come together to form the partnership. They contribute to the business in various forms such as:
- Capital Contribution: Partners invest money, property, or other assets into the business to fund its operations.
- Skills and Expertise: Some partners may contribute knowledge, skills, or labor instead of capital.
- Decision-Making: Partners often participate in managing the business and making strategic decisions.
Each partner has a role that can vary depending on the agreement. They may actively manage the business (active partners) or simply invest money without participating in daily activities (silent or sleeping partners).
Types of Partnerships:
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General Partnership: All partners share equal responsibility for the business and have unlimited liability.
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Limited Partnership (LP): Consists of general partners (manage the business) and limited partners (investors with limited liability).
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Limited Liability Partnership (LLP): Offers limited liability to all partners while still allowing them to manage the business. Common in professional services.
Requirements
- At least two individuals or entities are required to form a partnership
- A written or oral agreement is essential to define the partnership's structure and operations.
- The partnership must be established for a legal business purpose.
- All partners must mutually agree to form the partnership.
- Partners must contribute resources to the partnership.
- Registration of the partnership may be required depending on local laws.
- The partnership must have a distinct and unique business name.
Features
- A partnership is formed through a mutual agreement between two or more individuals or entities.
- A minimum of two partners is required to form a partnership.
- The partnership must be established for a legal business purpose.
- Losses are also distributed based on the agreed terms.
- All partners jointly own the business.
- Management responsibilities can be shared or assigned to specific partners, depending on the agreement.
Target audiences
- The type of products or services offered by the partnership determines the target audience.
- A law firm targets businesses and individuals needing legal assistance.
- Consider age, gender, income, occupation, and education levels.
- Where is your audience located?
- Understand your audience's buying habits, interests, and preferences.
- Identify the problems your audience faces that your partnership can solve.
- Business-to-Business (B2B): If the partnership serves other businesses, its audience includes companies, suppliers, or industry professionals.
- Clearly outline what your partnership offers (products/services).