How is a new partner admitted?
For admitting a new partner into the firm, there must be a consent of all the partners. The existing partners sell (or sacrifice) their share of profit in the favour of a new partner.
A partner can be admitted into the firm-
- to meet the need of extra capital for expansion of the buiness
- sharing of risks
- for efficient management of the business.
On the admission of a new partner, old partnership agreement comes to an end and a new partnership agreement is formed. This leads to the reconstituion of a firm.