Commercial Applications
Aman and Rohan started a business as partners. They verbally agreed to share profits equally but did not create a written agreement. Later, they had a dispute about profit sharing. What could have prevented this dispute?
- Registering the firm
- A written partnership deed
- Seeking legal advice before starting
- Limiting the number of partners
Answer
A written partnership deed
Reason — A written agreement of partnership, called the Partnership Deed, contains all the terms and conditions on which the partnership has been formed (including the profit sharing ratio). It is signed by all the partners and serves as a record for future, helping to resolve disputes that may arise among partners. A written partnership deed would have clearly recorded the profit-sharing arrangement and prevented this dispute.
Related Questions
Arun and Amrita agree to start a business together by pooling their resources and sharing profits. What type of business structure are they forming?
- Sole Proprietorship
- Partnership
- Joint Stock Company
- Cooperative Society
A partnership firm cannot sue a third party in a court of law unless:
- It has a minimum of three partners.
- It is registered with the Registrar of Firms.
- It operates in more than one state.
- It has a partnership deed.
Registration of a partnership firm is compulsory under the Partnership Act, 1932.
- True
- False
Why is it recommended to have a written partnership deed?
- It is mandatory for registration under the Companies Act.
- It serves as a legal record to resolve disputes.
- It reduces the firm's tax liability.
- It ensures limited liability for all partners.