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Partnerships Firms

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Types of Firms

1-    Proprietary Firms

2-    Partnerships Firms

3-    Joint Stock Companies

Partnerships Firms

More than two firms but less than 20 persons come to and build a business and operate it.

Each parent is the owner of the business and owns the profits/loses made in the proportion decided prior to setting up the business. This type of relationship is governed by the conditions laid down in Partnership Deed.

  • Its easy & economical to operate.
  • There are more resources to handle the complex issues and operations.
  • At present the tax works out to be = 30%+ 10%+ +2%= 33.66%

Expenditure allowed

  • Can pay interest on the capital to the partners on the amount of capital put by them in the business at the rate of interest of 12%
  • Firm can remunerate parents in the for of bonus. Salary commission etc provided partner takes part in the day-to-day operations of the firm and act as a working Partner. The remuneration is calculated as follows -

Professional Firm

    • On the first Rs 100000 of the book profit or in the case of the loss = Rs50000 or 90% of the book profits whichever is more.
    • On the next 100000 of book profits at the rate of 60%.
    • On the balance amount of book profits at the rate of 40%.

Any Other Firm

o        On the first Rs 75000 of the book profit or in the case of the loss = Rs50000 or 90% of the book profits whichever is more.

o        On the next 75000 of book profits at the rate of 60%.

o        On the balance amount of book profits at the rate of 40%.

Disadvantages

  • Do not have a legal status
  • Unlimited liability firm therefore personal property of the owners was always at risk if it runs into loses.

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