Partnership means an agreement where two or more like minded people come together to carry on a business and agree to share profits of the business. It is carried either by all or one acting for all. Partnership is of two types namely; Partnership for a fixed time period and Partnership at will. In this article we will discuss about partnership at will in detail.
Partnership at will-
It is a form of partnership where there is no fixed term or duration of partnership is mentioned in the agreement i.e., the partnership is entered into for an undefined term. According to Section 7 of the Indian Partnership Act, 1932, there are two conditions to be fulfilled for a partnership to be a partnership at will. These are
- There is no agreement about a fixed period for the existence of a partnership.
- No provision with regards to the determination of a partnership
So, if there is an agreement between the partners regarding the duration or the determination (termination) of partnership, this cannot be called as partnership at will. But if a partnership was entered into for a fixed term and continues to operate even after the pre-defined term is over then it will become a partnership at will from the expiration of this term.
A partnership will be deemed to be a Partnership at Will unless contrary intention can be shown to continue the partnership for a fixed term. Such contrary intention may be expressed or implied.
Features of a Partnership at will-
- Unless there is agreement to the contrary, a partnership at will also call for equal division of all of the business’ profits and losses in income and capital. This means that all partners are liable for any debts incurred by the business which could result in repaying creditors out of personal assets.
- Partnership at will can be dissolved easily, for example any partner has a right to serve a notice to dissolve the partnership at any time.
- If there are any outstanding debts to be paid by the partnership firm, they can be paid even after the firm dissolves. Such debts won’t stop the partners to dissolve the firm unless the debts are paid.
- When a partnership at will is formed for the sole purpose of carrying out a any particular venture, the partnership is not dissolved when the venture has been completed unless there is a contract to the contrary.
- A partnership at will does not prevent either party from entering into another partnership with another party for a single adventure or undertaking. Worth noting is that one single adventure or undertaking does not suggest the adventure or undertaking is a short-term event.
Benefits of Partnership at Will-
- Can be created between any entities
- Can be terminated by either entity with proper notice
- Can include provisions
Partnership, which is an agreement between two or more people to carry on the operations of a business and share the profits from such business is mainly of two types; Partnership for a fixed term and Partnership at will. Partnership at will is the one where duration for termination of partnership is not defined.
Written by Yaminee Verma @LEXCLIQ