Table of Contents
What is Partnership
Definition of partnership.
“Their relationship come into existence between two or more than two people for doing business with the only objective of earning the profit. In simple when two or more than two people become joint owner of the business with the agreed ratio of profit and loss is call partnership”.
What are the Characteristics of Partnership
- Formation: One of the main Character which attracts the people in doing business is easy to formation. It can be even formed in oral. But however it is recommended it should be at least in written form to for resolving the UN-expected dispute.
- Registration is not necessary by law, but for getting customers and other people trust. It can be registered with mutual consent by following the rules and regulation of Governing authority with partnership deed.
- Profit and loss sharing should be agreed at the start of the partnership. Every partner will get share as per agreement.
- Finance must be invest by every partner. In some cases, skilled person invest his skills instead of finance, but with mutual consent of other partners. Forgetting goodwill, legend or famous person having followers can be a partner without capital with the agreed ratio of profit.
- Goal will be only to earn profit and get shares. Doing work for charity or establishing to any organization without profit motive will be business, so will not partnership business.
- Number of Persons should be at least two and maximum twenty. Other legislation may have their own rules and regulations for numbers, like in banking sector partners should not be more than 10.
- Liability of the partners are unlimited, like characteristics of sole trader ship. If the loss not covered even by selling the whole business, then personal property of the also used for clearing the debts.
- Rights and duties are the same for every partner. They can participate in decision making, inspections, usage of firm assets for business use.
- Separate Legal Entity comes after the registration of firm. After registration, any partner may leave partnership or new partner appointed. in case of non-registration, there is no legal entity, with retirement or appointment of a new partner existing partnership will be dissolved and new come into existence.