Types of Partnership:
There are two types of Partnership:
I) General Partnership.
II) Limited Partnership.
Generally, all types of partnership are a general partnership. In general partnership, the liability of all the partners is unlimited.
It means that the personal property of a partner is also attached to the payment of debts to the creditors.
In general partnership, every partner has an equal right to take part in the management of the business of the firm. In our country, all the partnership firms are organised in this form.
On the basis of duration of their existence, the general partnership may take any one of the following two forms:
A) Partnership at will.
B) Particular Partnership.
A) Partnership at will: This kind of partnership is not formed for a particular purpose or for a particular period.
It continuity depends on the willingness of the partner. It can be dissolved by any partner by giving a notice in writing to the effect that he wants to withdraw from the firm. The success of this type of partnership largely depends on mutual cooperation of the partners.
B) Particular Partnership: It is formed for a particular period or for a particular purpose. Such a firm is dissolved immediately after completion of the particular purpose or period.
In a general partnership, the liability of all the partners in which the liability of some members is limited only to the extent of their individual contribution made to the firm. Such a partnership is called a Limited partnership.
The Indian partnership act does not allow the formation of a limited partnership. They are very common in USA and England.
Features Of Limited Liability:
I) It is formed by an agreement.
II) In a limited partnership, there must be at least one general partner.
III) The special partner cannot take part in the management of the firm.
IV) A special partner has to bring in the capital in cash.
V) The special partner cannot withdraw any part of his capital without the consent of other partners.
VI) The death, lunacy or insolvency of a special partner will not dissolve the firm.
VII) The registration of a limited partnership is compulsory.
Difference between General and Limited Partnership:
|Limited Partnership||General Partnership|
|1. A limited partnership requires the observance of some legal formalities|
A general partnership is comparatively free from legal formalities.
|2. The limited partnership is compulsory.||General partnership registration is optional.|
|3. The partner with limited liability can not take part in the management of a business.||All the partners have the right to take part in the management of the business.|
|4. In a limited partnership, The special partners have to bring their capital only in cash.||In General, a partnership is not required to bring in the capital only in cash.|
|5. The liability of a special partner is limited to the amount of his capital contribution.||Liability of all the partners is unlimited.|
|6. It is not stable because the death, lunacy or insolvency of a special partner has no effect on the continuity of a firm||It is unstable because the death, lunacy or insolvency of a partner leads to the dissolution of a firm.|
|7. The Liability of the Partner is Limited.||The liability of the partner is unlimited.|