Case breakdown: Movie Pulp Fiction
The scene that you just saw shows you Jules Winnfield (played by Samuel Jackson) and Vincent Vega (played by John travolta) enter a house where three boys are having breakfast. Jules introduces himself as a business associate of Marselleus Wallis. They identify Brett as the business partner of Marselleus Wallis and wants to question him.
In this blog, Learning Perspectives will explore what exactly is a Business Partnerships.
What is Partnership?
When two or more people decide to join hands together to run a business, it is called a business partnership. A partnership deed is drafted that mentions all the details regarding the business and profit sharing ratio of the partners. Partnerships do not have a separate legal entity which means if the firm goes bankrupt, private assets of the partners would be used to meet the deficit.
Features of Partnership:
- Partnership is a business is a tie-up of two or more people.
- These “people” can include individuals, groups of individuals, companies, and corporations, therefore partnerships are highly adaptable in form and can vary in complexity.
- Each partner shares directly in the organization’s profits and shares control of the business operation, making it very profitable for the owners when times are good.
- But in bad times the consequence of this profit sharing is that partners are jointly and independently liable for the partnership’s debts.
- Two heads (or more) are better than one, your business is easy to establish and start-up costs are low, more capital is available for the business, you’ll have greater borrowing capacity, high-caliber employees can be made partners.
- There is opportunity for income splitting, an advantage of particular importance due to resultant tax savings.
Rights of a Partner:
- All the Partners of the company have the right to participate in the management of the company.
- Partners have the right to be consulted in the running of the business.
- Partners also have the right to allow or not allow admission of a new partner.
- If a partner has advanced a loan to the firm, he has the right to receive interest on it, in case the rate of interest isn’t agreed upon, then interest is paid @ 6% according to the partnership act, 1932.
Many business in India start with 2 partners, in recent times we have seen a surge in such businesses. Mohit and Rajat Jain together launched Kimirica Hunter. They manufacture amenity products and toiletries. This company is worth Rs. 300 crores now and serves a large number of international hotel chains.
Double Entry Book Keeping by T.S Grewal
Written by: Ms. Gitika Chandra