Property of the firm is taken to mean the joint property of all the partners. The Partners if act by an agreement amongst themselves may determine, what constitutes the property of the firm. In the absence of such agreement, the following shall constitute the property of the firm.
(i) Property originally brought in by the firm– Any property which is brought by the partners, at the commencement of the partnership and put into joint stock of the firm.
(ii) Property acquired afterwards– Any property which is acquired by or for the firm, after the commencement of the partnershipis the property of the firm.
(iii) Partner’s personal property in the firm’s use– Where the personal property of a partner is used in the business of the firm, it depends upon the intention of the parties whether it has become the property of the firm or not.
Example: A partner’s personal car is been used exclusively for firm’s purpose, the car becomes the property of the firm and the partner becomes creditor for that amount.
(iv) Conversion of joint properties into separate property– Where a property is bought with the money of the firm, but in the name and for the exclusive benefit of a partner, the partner becomes a debt or to the firm for the purchase money; and the property becomes the personal property of the partner. Similarly, where apart of the joint properties is allotted to a partner, on the dissolution of a firm, it becomes his separate, personal property.
Example: Car bought of the joint fund of the firm isused by A, a partner for private use only. The car should become the property of A and he becomes a debtor to the firm for the car amount.
(v) Goodwill– The term good will has been not been defined in the act. It means every advantage and good representation and reputation which the firm has acquired while carrying out its business. Goodwill is the property of the firm and it can be sold either separately or along with the other property of the firm. Hence goodwill is the part ofthe property of the firm.
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