COMPANY FORM OF BUSINESS ORGANISATION

Any business venture is normally started by an entrepreneur-called ‘proprietor’. As the business grows an individual is unable to find enough financial and/or managerial resources to run and expand the business. He therefore invites a few of his relatives or friends to join in the business Online Company Registration in Kerala. Thus a partnership is formed. As the business grows it becomes necessary to bring in more partners to provide finance and /or managerial inputs. Here he finds that it is impracticable to increase number of partners beyond certain limits due to legal and administrative difficulties.   

Limitations of partnerships- partnership as form business organization has following inherent limitations-

Ø  A Partner with object of acquisition for gains cannot be formed beyond prescribed number of partners [Number expected to be 100 in the 2013 Act]-section 464 of the 2013 Act.

Ø  Partnership is really not a legal entity. It is an association of persons. It consists of individual partners for the time being. It is treated as separate entity only for purposes of tax laws, filing of suits ect.

Ø  Since partnership is not separate from partners constituting the partnership firm a partner cannot enter into a contract with the firm.

Ø  A partner is agent of the firm and he can legally enter into contracts which can bind the firm.

Ø  Partners have unlimited personal liability in respect of debts of the firm. Thus a partner will be liable even in case of contracts entered into by any other partner on behalf of the firm

Unless there is specific provision in partnership deed partnership gets dissolved on death of partner Online Company Registration in Kerala. Thus life of partnership firm is limited.

Since every partner has full rights to take active part in the activities of firm and there is unlimited liability a partnership can run only as long there is mutual trust and faith among partners. Thus a partnership has inherent limitations for growth beyond certain limits.

Wider base necessary for big business-In order to have large business it is essential to obtain capital from large number of people. It is not possible to allow all of them to take active part in the business. Thus it is necessary to develop an organization where capital for business can be supplied by many but management can be only in few hands. It is also necessary to have an organization where a person providing capital is not saddled with unlimited liability http://www.companyregistrationkerala.in.