A Partnership is a form of business in which association of persons pool money, skills, and other resources, and share profit and loss in accordance with terms of the partnership agreement. It is a single business where two or more people share ownership. It is a legal form of business operation between two or more individuals who share management and profit. There are two types of partnership firm’s i.e. Registered firm and Un-Registered firm. Registration of firm is not mandatory although it is advisable to form a registered Partnership firm for availing legal benefits.
All of the partners are equally responsible for the business's debts and liabilities. In addition, all partners are allowed to be involved in the management of the company. In fact, in the absence of a statement to the contrary in the partnership agreement, each partner has equal rights to control and manage the business. Therefore, unanimous consent of the partners is required for all major actions undertaken. Be advised, though, that any obligation made by one partner is legally binding on all partners.
- There should be at least two persons subject to a maximum of ten persons for banking business and twenty for non-banking business to form a partnership firm.
- There is an agreement among the partners to share the profits earned and losses incurred in partnership business.
- Partnership is formed by an agreement-oral or written-among the partners i.e. Contractual Relations
- A partnership business solely rests on utmost good faith and trust among the partners.
- Each partner has unlimited liability in the firm. This means that if the assets of the partnership firm fall short to meet the firm’s obligations, the partners’ private assets will also be used for the purpose.
- No partner can transfer his share to any outside person without seeking the consent of all other partners.
- With more than one owner, the ability to raise funds may be increased, both because two or more partners may be able to contribute more funds and because their borrowing capacity may be greater.
- A partnership is relatively easy to establish, manage and run. They are less strictly regulated than companies.
- Partners can share the responsibility of the running of the business. Therefore be the main sales person for the business.
- Partners share the decision making and can help each other out when they need to. More partners means more brains that can be picked for business ideas and for the solving of problems that the business encounter
- A partnership may benefit from the combination of complementary skills of two or more people. There is a wider pool of knowledge, skills and contacts