Definition of partnership: According to section 4 of the Indian Partnership Act, 1932, “Partnership is the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all.
Features of a Partnership:
- Two or more than two persons: There must be at least two persons to form a partnership and all such persons to be competent to contract, however section 464 of the Companies Act, 2013 empowers the Government to prescribe maximum number of partners in a firm subject to maximum of 50.
- Agreement: Partnership is the result of an agreement. Such an agreement can be either oral or in writing. But to avoid any dispute it is better to have written agreement called partnership deed.
- Profit sharing: profits must be distributed between partners according to terms and conditions of the partnership deed.
- Note – in Absence of partnership deed profit sharing will be equal-equal.
- Business: A partnership is formed to do a lawful business. Business includes every trade, vocation & profession.
- Note: If Two or more persons are purchases any Asset without business purpose then it said to be a Co-Ownership.
- Unlimited liability: The liability of a partner for acts of the firm is unlimited. All the partners are liable jointly and severally to third party for all the acts of the firm.