When firm requires additional capital or managerial help or both for the
expansion of its business a new partner may be admitted to supplement its
existing resources. According to the Partnership Act 1932, a new partner can
be admitted into the firm only with the consent of all the existing partners unless
otherwise agreed upon. With the admission of a new partner, the partnership
firm is reconstituted and a new agreement is entered into to carry on the business
of the firm.
A newly admitted partner acquires two main rights in the firm–
- Right to share the assets of the partnership firm; and
- Right to share the profits of the partnership firm.
For the right to acquire share in the assets and profits of the partnership
firm, the partner brings an agreed amount of capital either in cash or in kind.
Moreover, in the case of an established firm which may be earning more profits
than the normal rate of return on its capital the new partner is required to
contribute some additional amount known as premium or goodwill.
Director at Samridhh Fincoach
The author loves writing on financial and economic matters. His writings are full of real life instances which enrich not only the readers knowledge but also his application of concepts
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