Partnership is an agreement between two or more persons, pool
their resources and jointly start a lawful business with the object of earning
profit and it share among themselves. Section 4 of Indian Partnership Act 19352
defined partnership as:"the relation between persons who agreed to share
the profits of a business carried by all or any one of them acting for
all"
The persons who have entered into partnership are individually
known as Partners and collectively as Firm.
Nature of
Partnership
Following are the essential features or characteristics of
partnership:
1. Two or more persons: A minimum of 2 persons are required to start a partnership firm.
But there is a maximum limit of members – 10 person in case of banking business
or 20 persons in case of any other business.
2. Agreement between the persons: A partnership is the result of an agreement which may be oral or
written. The agreement forms the basis of economic relationship among the
partners and it act as a criteria to avoid future disputes. Moreover the
agreement must be made only among the persons who legally competent to
contract.
3. Business: The agreement should be for carrying on some legal business.
Such business must be for profit making.
4. Sharing of profits: The profit of the business should be shared among the partners
is another feature of partnership business. They shared the profit in the
agreed ratio. In the absence of such agreement partners share the profit
equally.
5. Carried by all or any one of them acting for all: The day to day operations of a partnership business is managed
by all the partners or one among the partners managed it. This means mutual
agency relationship exists in partnership.
6. Unlimited Liabilities: Liability of each partner is unlimited This means creditors can recover
amounts due to them not only from the firm’s properties but also from the private
properties of the partners.
