Partnership Company

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Hi All,

In continuation to my earlier blog about company formation in relation to banks today i will write about partnership companies.

Again as the name suggests, partnership means 2 or more people coming together to form a company wherein profits and losses will be shared accordingly. Partners may be individuals, companies, schools etc. Partnership may exists or people may come together to increase their income and would also create a legacy for their future generations. Also when 2 or more people come together they enjoy economies of scale and also can leverage each others time and resources.

In Banking terms, a Bank is only concerned about the agreement wherein the partners mutually agree to the terms as to who will open and operate the company account and also will be able to borrow in the name of the company if required. Generally a partnership agreement is in place when their are more than 2 individuals or entities involved. A partnership agreement is not made when they are only 2 people in the company and they agree to share the profits and losses arising out of the business and trust each other. In such a case, the Bank would request both the partners to sign on the account opening documents and would decide as to who will operate the account and borrow money incase required. In most of the companies wherein partners trust each other, the account will be operated by both individuals singly (with their single signature). But if the trust factor is less between the partners, the signing instructions are placed as jointly wherein any instruction provided to the Bank has to be signed by both the partners.

Their are many advantages for a partnership company as mentioned above but the major disadvantage would be that one partner might not be responsible enough in handling the responsibilities and the other would do everything but the profit would be shared equally. Also when profits of the firm increases, one might become greedy and would want more profit share or would want to take over the company completely.

Lastly, from a Bank's point of view a partnership deed or an agreement is enough to ascertain who would operate the account and in the absence of an agreement all partners would be required to sign the required documents to start the account. This is considered a normal company account by the Bank and all channels through which customer can operate the account are provided.