BUSINESS PLAN FOR PARTNERSHIP FIRM

The partnership is crucial to the growth of any business venture. Merchants and traders from time
immemorial have made use of the principle of a strategic partnership to conduct their businesses;
the trend is still very much applicable today. A partnership manifests itself in different forms, ranging
from business owners cooperating to invest in a project to share technical knowledge and ideas
between firms. Whatever any business does, it is important to look for the right partnership
agreement that benefits both parties.

There are a lot of advantages in opening a partnership firm like ease of formation, larger financial
resources, combined abilities and judgment, direct motivation, close supervision, flexibility of
operation and many more.

It is suitable for small and medium sized businesses, popular amongst wholesale and retail trade. It is
highly appropriate for a the professionals like lawyers doctors chartered accountants etc. in which
high degree of knowledge and knowledge sharing is considered as an essential element to overcome
the difficult, uncommon, complicated and unprecedented situations and direct contact with the
clients.

MEANING AND DEFINITION

A partnership is a voluntary association of two or more persons who agree by making oral or written
agreement to carry on some business jointly & share its profits and losses. They combine their funds
and skills to carry on the business together.

It is an arrangement where parties, known as business partner, agree to cooperate to advance their
mutual interest. The partners in a partnership may be individuals businesses, interest-based
organisations, schools, governments or combinations. Organisation may partners to increase the
likelihood of each achieving their mission and to amplify their reach. A partnership may result in
issuing and holding equity or may be only governed by a contract.

Some poplar definition are those given by L.H.Haney, Kimball, John Shubin and Henson etc.

Partnership in India:
In India, the partnership business is governed by “ The Partnerhip Act, 1932”.

Rights and obligations of partners unless specified in the partnership deed are governed by as
prescribed in the “the partnership act”.

Though it is not compulsory to register under the law, it is highly desirable to do so, to overcome the
legal consequences of non-registration, in case of disputes among partners or with third party.
At least two persons, not exceeding 50 except in case of professionals can commence a partnership
business where there is mutual interest of profit in a good faith, trust and confidence in each other
of the joint ownership and so do joint and sever liability of an unlimited extent even to attach
personal properties of each partners, each one is an implied agent of the firm. It also implies non-
transferability of the interest of any partner without prior consent of each.

Partnerships and type of partners:

Basically four kinds of partnerships prevails viz.

1. General partnership with unlimited liability(India) in which each partner is entitled to take
active part in the management unless decided otherwise.
2. Limited liability partnership(LLP act 2008) which is a hybrid business having features of
partnership and joint stock company where liability of a partner is limited to its percentage
share for an unauthorised or independent action of others but unlimited in case of an act of
intention to defraud the creditors to the firm. It is differs from limited partnership where at
least one partner has unlimited liability.
3. Partnership at will formed for an indefinite period depending upon the will of partners.
4. Particular partnership formed for a specific period or objective only which automatically
cease to exist upon expiry or attaining the objective.

Partners in the firm can be of various types which are;

1. Partners with unlimited liability viz; Active or working partner known to outside world,
Sleeping or dormant partners and Secret partner which are not known to the outside world.
2. Partners with limited interest or liability without active participation in the management viz;
Limited partners with the liability limited to the extent of his share in the capital and profits
of the firm. The firm is not dissolved in the event of his death, lunency or bankruptcy.
Partners for profit only who shares in the profits of the firm but not in the losses. But his
liability for the firms debt is unlimited
3. Nominal or ostensible or quasi-partner: they neither contribute to the capital nor takes part
in tne management of the business, he doesn’t share in profits and losses and only lend his
name and reputation for the benefit of the firm. He represents himself or knowingly allows
himself to be represented as partners. He becomes liable to outsiders for the debts of the
firm.
1. They can be two types:
1. Partner by estoppel: A person who by his words [spoken or written] or
conduct, represents himself as a partner becomes liable to those who
advance money to the firm on the basis of such representation.
2. Partner by holding out: When a Person is declared as a partner and he does
not deny this even after becoming aware of it I will come is liable to the third
parties will lend money or credit to the form on the basis of such a
declaration.

1. Minor as a partner: A minor is a person who has not completed 18 years can be admitted to
the benefits of partnership with the mutual consent of all the partners. Minor is entitled to a
share in the profits with liability limited to the extent of his share in capital and profits of the
firm. He cannot file a suit against the firm or partners to get his share except when he wants
to disassociate himself from the firm. After becoming a major, he will be considered as a full
fledged partner with all implied privileges and liabilities of partnerships if he or she decide to
continue with the business else partnership cease to exist giving notice of intended within
six months of becoming major.
2. Sub-partner : a third person with whom a partner agrees to share his profits desired from
the firm. He does not take part on the management of the firm. He is not liable for the firms.
Dissolution of partnership:
It may only be dissolution of the partnership when firm is not dissolved or dissolution of the firm
completely when business ceases to exist depending upon the circumstances and / or as per terms
and conditions of the deed or through the law of the land. It can be done by mutual consent, notice
by a partner, by contingent situations or by compulsion in the event of insolvency, unlawful activities
or insanity of the partner.
In case of dissolution settlement of account is governed by the prescribed procedure laid down as
per the section 48 of the Partnership Act, 1932.

Merits of partnership: easy to form as legal formalities are not required and easy to dissolve, larger
financial resources along with pooled skill and experience improving quality of product, services and
management, direct motivation and cooperation due to mutual interest of profit and close
supervision due to the factor of unlimited liability to the extent of attachment of personal
properties, free form interference from government control in case change in size and nature of
business, capital or management providing greater flexibility to adopt prevailing market conditions.

Demerits of partnership: limited resources compared to joint stock companies, lack of

professionalism, unlimited liabilities, uncertain life, conflict of interests, insolvency or insanity of a
partner, lack of confidence or mistrust amongst partners, secret known to all partners, implied
authority, low confidence by public and financial institutions as it is free from legal restrictions and
Government control.

Partnership deed
of
star bakery
Ms. Rim Patel aged about 24 years old, Indian inhabitant residing at C201,
blue stone building, opposite Lakeview Garden, Dandi Road, Surat.

Mr Param Patel aged about 26 years old, Indian inhabitant residing at 27,
Agam bungalows, near SD Jain school, Pipli Road, Surat.

Ms Snehal Desai aged about 27 years old race, Indian inhabitant residing at
703, blossom residency, near Hills High school, VIP Road, Vesu, Surat.

Ms Gunjal Dalal, aged about 35 years old, Indian inhabitant residing at

bungalow number 47, near GD Goenka school, new city light, Surat.

Ms Fiona Patel, aged about 30 years Old, Indian inhabitant residing at

1201, Rajan‘s Emporia, near Tapi River, Vesu, Surat.

Mr Aary Jain, aged about 22 years old, Indian inhabitant residing at

Shubham residency, add 87, Neville Park Society, old RTO Ring Road, Surat.

The parties of the force 1st to 6th part have agreed to form the
partnership deed as per their following terms and condition:

1. A firm in the name and style of STAR CAKES AND BAKES’ (now onwards THE FIRM) will be
formed based on the principle of General Partnership.
2. THE FIRM so formed will be engaged in production of the cakes and other baked items to
be consumed by the humans and will be as per the prescribed laws of land for production
and distribution of food items in India.
 3. THE FIRM so formed will be incorporated at “STAR CAKES AND BAKES”, Plot no. 9, Star
Plaza, Khajod Chokdi, Sarsana, Surat, Gujarat, India # 395015 and the same will be
registered as the address of THE FIRM with local authority.
4. Unless specified or when not clarified or not included at all in this deed, this partnership
will be governed by the law of the land i.e. “ THE PARTNERSHIP ACT, 1932”.
5. The terms and conditions are binding to all the partners as decided and specified in this
deed and can only be changed by the mutual consent of all the partners else it will cease
to be functional and needs to be dissolved.
6. None of the partners shall indulge in any activities which insult the soul of mutual business
of the partnership, nor one shall commit an unlawful act which harms the reputation of
the firm in one or the other way.
7. Each one engaged in this deed as partners shall work for the firm and promote its
businesses to the betterment of the firm so as to improve product, sales and services,
expand and upgrade as per the prevailing marked demand and conditions, build repute of
the firm in totality, financial discipline and management.
8. Percentage of Ownership

Within the partnership agreement, each partner have agreed to bring cash into company as his/her
capital contribution to help cover startup costs or contributions towards land & buildings, furnitures
and fixtures, procuring machinery, attaining facilities like electricity, water and drainage, gas
connections etc. from local authority, services of professionals at the time of establishment of the
business. Typically these contributions dictate the percentage of ownership each partner has in the
business, and as such as are important terms within the partnership agreement.

1. Division of profit & loss: Partners have agreed upon to share in profits and losses in
line with their percentage of ownership.
2. An interest at the rate of 12 % p.a will be granted from the profit earned during
the financial year after deducting taxes according to the percentage share of the
partner.
3. Decision making and management: The terms regarding the decision making
process is by way of a voting system of head count only and not the percentage
share must be followed to enforce Checks and balances among partners. In addition
to decision making procedures to resolve the dispute among partners is by way of
mutual consent and agreement between them in the presence of all or specified
committees of partners.

1. Authority: Separate responsibilities are to be observed by an individual or by two or more

partnered to deal with local authority, employees and its association, financial institutions,
production, sales and services and other managerial tasks as decided from time to time by
mutual agreement of all partners and it is preferably to be rotational so as to make everyone
capable of learning and handling situations in the absence of responsible partner
2. Meetings of partners:

1. At the end of a financial year an annual general meeting must be called upon for all partners to
discuss the firm’s financial position and profit or loss, future plan, capital expenditure above the
specified limit and any such matter which must need mutual agreement.
2. Active partners shall meet as and when needed or at least in a month to discuss current affairs
and to make aware other partner’s accordingly.
3. Extraordinary General meeting is to be called upon if situation demands so which requires
agreement by all.

1. Withdrawal or Death

In case of the death of partners or withdrawal of the partnership only dissolution of the partnership
is followed upon and business will continues as under after paying off capital share and interest
upon his percentage share of retiring, leaving or nominee of decreased partners:
1. A new partner will be introduced with distribution of the capital share of the deceased, retiring or
leaving partner on home/her.
2. In case no new partner is introduced the shares/capital of the leaving partner will have to be
distributed among the partner or partners as per their will.
3. in case capital is distributed only partly after wilful contribution by a partner or partners, the
remaining capital will be distributed amongst partners other than wilful partners; according to their
percentage capital and profit/loss share.
4. In case none wants to contribute willingly towards capital distribution but still wants to continue
the business, the whole capital is to be distributed amongst remaining partners according to their
percentage capital and profit/loss share.

If the partnership has been dissolved legally due to some disputes, expiry, contingency or by law,
THE FIRM ceases to function and exist immediately upon receipt of such notice and the accounts will
be ceased and no one would be able to withdraw money from the business until the dispute has
been resolved.

Legal Liabilities:
Each partner is equally and severely liable to an unlimited extent in case of any legal disputes raised
upon by third party be it creditors or others. However the liability of the resultant award granted by
the court will be shared according to the percentage share in capital and profit/loss

Schedule for Duties and responsibilities imparted on partners:

Schedule for Percentage capital of the partners:

Schedule for deciding share in Profit / loss:

The profit and loss sharing is based upon the capital contributed by the partner.

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