Admission of Partner Notes1

Study Material & Notes for the Chapter 4

Partnership - Admission of a Partner

I.   ADMISSION – MEANING, NEED AND EFFECTS

A.  Meaning of Admission of a Partner

An existing partnership firm may take up expansion/ diversification of the business. In that case it may need managerial help or additional capital. An option before the partnership firm is to admit partner/partners. When a person is admitted to the existing partnership firm, it is called admission of a partner.

B. Partners Consent

According to the Partnership Act 1932, a person can be admitted into partnership firm only with the consent of all the existing partners unless otherwise agreed upon.

C. Firm Reconstituted
  1. On admission of a new partner, the old partnership comes to an end and the partnership firm is reconstituted with a new agreement. However the partnership firm continues
  2. Reconstitution of a firm always leads to change in the existing profit sharing ratio
D. Rights of a new Partner
  1. Right to share profits in future
  2. Right to share assets of the firm

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