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Rights and Duties of Partners in Partnership Firm ( Key Points)

rights and duties of partners

Partnership is a significant element of business, and partners’ rights are crucial to partnership businesses. A mutual agreement among the individuals referred to as partners creates a relationship between them. The Indian Partnership Act of 1932 is the legal framework for the contract. Additionally, this results in the partners in the business above having reciprocal rights and obligations. 

What is a partnership firm?

Any group of two or more people who decide to launch a business jointly is referred to as a partnership firm. As an investment in the industry, the partners’ assets are provided. The company is a partnership firm, and these people are its partners. Any partnership firm’s primary goal is to generate profits by working together to outperform owners’ enterprises in all performance areas.

The Partnership Act of 1932, which establishes all of its requirements, defines the framework of the partnership firm. A partnership deed that outlines the firm’s terms, including its capital, profit-sharing arrangement, and business activities, must be written when registering a partnership.

Even though you don’t have to do so right away once the partnership deed is signed, you must register it with the Registrar of Firms. Such a partnership firm’s registration is optional and subject to the partners’ agreement. However, registration will grant the partnership firm several advantages.

Rights of partners 

Right to participate in business operations.

All partners are eligible to take part in the company’s business operations. The court may become involved in these situations if an individual is wrongfully excluded from participation due to interference with one partner’s management capacity. The court may issue a prohibition to prevent the other partner from doing so.

Right to consult

When there is a disagreement among the company’s partners over the firm’s operations, the majority opinion of the partners is considered. Before making a decision, every member of the partnership has the right to voice their views. However, the organization’s operations can only be changed with the approval of all partners. In general, the majority of couples tend to agree. 

Right to access accounting records

All the partners, whether active or passive, have access to the partner company’s financial records. The Partner retains the right to review it and get a copy if necessary. But only bona fide people may use this right.

Right to compensation

Aside from the business’s profits, no partner has any right to additional compensation. The provisions of the partnership agreement must be met for the provision to be made. Partners have the right to request such a reward in such circumstances and are eligible to get one. Generally speaking, it is common for firm associates to decide that the managing partner will receive more than their share due to all the challenges they face when running the organization.

Right to profit-sharing

All business gains must be divided equally among the partners. The partner company’s risks likewise participate equally in a similar manner. The partner must confirm the share’s value by asking the other partners if they have agreed. There is no connection between the partners’ profit-sharing portion and their capital contribution to the joint venture.

Right for Indemnification

Each partner has the right to request remuneration from the business. This right is provided for business management and against payments made in an emergency to shield the organization from damages. For actions that a reasonable and responsible person would do in an emergency, a partner may be reimbursed for the money he made.

Right to Capital Interest

Partners have no right to receive interest on the capital they have provided. However, if they choose to take advantage of the interest benefit, the payment must only come from profits; in other words, it is impossible to pay interest to partners while there is a loss.

Right to terminate the business

In the event that all other partners agree, one partner of a partnership business may terminate the partnership. To dissolve the partnership, however, any partner must notify the other partners in writing of his desire to do so if the partnership is at-will.

Duties of partners

Duty to act honestly.

The partners must act honestly in order to achieve a bigger shared good. The partner is responsible for maximizing profits for the business. The corporation should not be harmed by a partner’s unauthorized gain from the business..

Duty to provide true accounts

The partners are obliged to inform any partner or that partner’s legal representatives entirely about any concerns impacting the organization.

Duty to Indemnify for fraud

If a partner’s actions cause the firm’s business to suffer any losses, he is responsible for making up such losses to his partner. This obligation is in place to ensure that partners treat customers honestly and fairly. On the other hand, the need for indemnity for fraud is not waived by signing a contract because it violates public policy to enter into such a contract. 

Duty not to compete

According to this law, a partner must account for any gains they receive by running a business that is either similar to or competitive with the company. The partner may engage in any business beyond the company’s core competencies. The partnership agreement has the power to modify the duty. 

Duty to be Diligent

A partner must perform his tasks diligently. A partner cannot be held accountable for honest mistakes committed or acts performed in good faith.

Duty to take good care of the company’s assets

According to this law, a company’s property must belong to it and be utilized solely for corporate purposes. A partner is responsible to his other partners if he misuses the property for his gain.

Duty to account for personal gains

A partner is required to account for company property that is used and generates income. This responsibility results from the partners’ fiduciary relationship.


A partnership’s members can draught a contract outlining their rights and responsibilities. Each member in a partnership has to behave in the best interests of the business overall and go above and beyond to prevent any losses for the business because the partnership relationship is one of good faith and fair dealing.

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