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
- 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
- Reconstitution of a firm always leads to change in the existing profit sharing ratio
D. Rights of a new Partner
- Right to share profits in future
- Right to share assets of the firm