12 November 2010
• Can a firm become a partner in another firm?
A partnership firm cannot become a partner of another firm because it is not a legal person. However the partners may be partners in another firm in their individual capacity .
A firm is strictly not a person; It is an association of persons and the agreement by which a firm purports to enter into a partnership with an individual or another firm merely makes the partners of that firm individual partners of the larger partnership. A firm as such cannot enter into an agreement as a partner with another firm or individuals.
Therefore, when one partnership enters into a partnership agreement with another partnership firm, the partnership is in fact between all the partners of both the firms.
12 November 2010
Question may be asked if company can become a partner in a firm why can not a partnership firm? But we all know Company has a separate legal entity which is not the case with partnership firm.
Section 41(2) provides that only a person can be member of a company who has agreed in writing to become a member and whose name is entered in the register of members.
As per Department’s Circular No. 4/72, dated 9-7-1972, it has been clarified that “a firm” not being a person, can not be registered as a member of a company.
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