The Nature of Partnership

4. Definition of “partnership”, “partner”, “firm” and “firm name”-“Partnership” is the relation between person who have agreed to share the profit of a business carried on by all or any of them acting for all.

Persons who have entered into partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”.

5. Partnership not created by status – The relation of partnership arises from contract and not from status;

and, in particular, the members of a Hindu undivided family carrying on a family business as such, or a Burmese Buddhist husband and wife carrying on business as such, are not partners in such business.

6. Mode of determining existence of partnership- In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together.

Explanation 1 – The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such persons partners.

Explanation 2 – The receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned by a business, does not of itself make him a partner with the persons carrying on the business;

And, in particular, the receipt of such share or payment-

(a) by a lender of money to persons engaged or about to engage in any business.

(b) By a servant or agent as remuneration.

(c) By the widow or child of a deceased partner, as annuity, or

(d) By a previous owner or part owner of the business, as consideration for the sale of the goodwill or share thereof.

Does not itself make the receiver a partner with the person carrying on the business.

7. Partnership at will- Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is “partnership at will”.

8. Particular partnership- A person may become a partner with another person in particular adventures or undertakings