Under partnership law, every partner has certain legal rights that arise from the partnership agreement and from statutory provisions. These rights ensure fairness among partners and allow the business to function smoothly. The most important rights are explained below in simple terms.
1. Right to Share Profits
Every partner has the right to receive a share of the firm’s profits.
- If the partnership agreement specifies profit ratios, those will apply.
- If there is no agreement, the law presumes that all partners share profits equally, regardless of how much capital each contributed.
A partner is not entitled to salary or extra payment for working in the firm unless the agreement specifically provides for it.
2. Right to Participate in Business
Every partner has the right to take part in managing and conducting the firm’s business. This means:
- Each partner can be involved in decision-making.
- No partner can be excluded from management without consent.
- All partners are entitled to be consulted on important matters.
Ordinary business decisions are decided by majority, but fundamental matters such as change in business nature require consent of all partners.
3. Right to Be Indemnified
A partner has the right to be reimbursed by the firm for expenses or losses incurred while acting for the firm. This includes:
- Money spent in the ordinary course of business
- Payments made to protect the firm from loss
- Emergency actions taken in good faith to save the firm’s property or reputation
However, a partner cannot claim indemnity for losses caused by their own negligence, fraud, or misconduct.
4. Related Supporting Rights
These additional rights support the main rights above:
Right to Access Books
Every partner can inspect and copy the firm’s books of accounts.
Right to Interest on Advances
If a partner lends money to the firm beyond their capital contribution, they are entitled to interest, usually at the statutory rate unless otherwise agreed.
Right to Equal Treatment
All partners must be treated fairly and honestly by each other because partnership is based on mutual trust and good faith.
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