01 June 2012
A minor can enter into Partnership for the benefit of the firm. He will be a partner in profits only & can not be liable for the debts to third parties taken by the firm.
The above is the known concept. But can a person who is not a minor, i.e. who attained the age of majority can become a partner in a firm for profits only? I had read some where earlier that a person can enter into partnership as a "PARTNER FOR PROFITS ONLY" & as per my memory the explanation was as under
"A partner who shares in the profits only without being liable of the losses is known as partner in profits. He does not take part in the management of the business but he is liable to third parties for all the debts of the firm."
Does the above concept exist. Is it written somewhere in Partnership Act 1932? Please clarify. And if possible please mention section, provisions, circulars or sitations if any.
Partnership Deed basically is a written document detailing the features of agreement amongst partners. If all partners agree that one of them can be PARTNER for Profits only then it will work.
Need arises to re-draft Partnership Deed whenever there is a substantial and crucial change is there: like minor becoming adult or another partner joins or any partner resign or change in profit loss sharing ratio or upon death of a partner.
02 June 2012
Ok... sir as I have mentioned above a 'partner in profits only can be held liable to third parties for all the debts of the firm' - I didnt understand this concept sir. How can a partner who is not liable for lossess be held liable for debts payable to third parties, as lossess also will comprise of debts to third parties rite. Are these kind of partners held liable only in case of dissolution of the firm?
One more question sir, whether a partner who is not a minor & who is entered for profits only, can put a clause in deed saying that he will not be liable for any debts also?
02 June 2012
To write a clause in the partnership deed that one of the partner would be entitled to profits only and will not share losses of the partnership; then such clause will not work when outside parties lodge a claim against the firm. . It means he would be liable to pay them to unlimited extent. . To elaborate; in these circumstances; such partner would also be liable to make payment to others as his liability is unlimited ( like sleeping partner who despite not taking any part in the working of the partnership; is liable to pay the debts of the firm to unlimited amount). . So to share the profit only by one of the partners will work inter-se ( between them only ) and this clause will not work for outsiders because partnership act does not allow such clause as workable one. .
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