The property of the firm.
The Property of the Firm
Definition:
Property of the firm refers to all the assets and properties that belong to the partnership as a whole, rather than to individual partners personally. It includes everything that is used for the purpose of the partnership business or acquired with the partnership’s funds.
Types of Property in a Partnership:
Firm Property:
Assets that belong to the partnership. These are used exclusively for partnership business.
Partner’s Personal Property:
Assets owned individually by partners, which are not part of the partnership.
Legal Position and Principles:
Under most partnership laws (for example, the Indian Partnership Act, 1932), any property brought into the partnership business or acquired with partnership money or for the partnership business is presumed to be the property of the firm.
This is known as the presumption of firm property.
Even if the property is registered in the name of one or more partners, if it was bought for the partnership, it is considered partnership property.
Partners are entitled to use firm property only for partnership purposes, and no partner can deal with it as their own.
Firm property can be used to pay off the firm’s debts but not personal debts of individual partners.
Important Features:
| Feature | Explanation |
|---|---|
| Acquisition | Property acquired with firm funds or for firm business is firm property. |
| Registration | Registration in a partner’s name does not exclude it from being firm property. |
| Right of Use | All partners have equal rights to use firm property. |
| Transfer | Partners cannot transfer firm property for personal purposes. |
| Security | Firm property may be used as security for firm debts only. |
Illustrative Case Laws:
Vithalbhai Rambhai v. Purushottam S. Trikamji (1944):
Held that property bought with partnership money is partnership property even if registered in a partner’s name.
Merricks v. Merricks (1934):
Confirmed the principle that property brought or acquired for the firm is presumed firm property.
Kumar Dhanraj v. Shobha Kumari (1977):
Held that goods bought with partnership funds cannot be claimed as individual property by a partner.
Summary
Property of the firm means all assets belonging to the partnership acquired for business.
It is presumed to be partnership property if acquired with partnership funds or for partnership use.
Individual partners cannot claim personal ownership over firm property.
Firm property can only be used for firm business and to pay firm debts.
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