— Kishore V, SME and ACW at Edumarz
According to Section 4 of the Partnership Act of 1932, a partnership is an agreement between two or more people who have agreed to share the profits and losses of a business that will be run by all of them or by any of them acting for all of them.
Individual partners and firms are referred to as ‘partners‘ and ‘firms,’ respectively, and the name under which they do their business is referred to as ‘firm name.’
The following are the key qualities of a partnership:
(i) Two or More Persons:
In order to create a partnership, there must be at least two people working together for a common purpose.
In other words, a firm’s minimal number of partners is two.
(ii) Partnership Deed:
A partnership deed is a written agreement between the partners that spells out all of the partnership’s terms.
It generally contains information about all aspects of the partners’ relationship, such as the business’s goal, each partner’s capital contribution, the ratio in which profits and losses will be shared by the partners, and the partners’ entitlement to interest on capital, interest on the loan, and so on.
(iii) Business:
A partnership is created to conduct legal business, which is one of its most significant aspects.
In the case of an illicit enterprise, a partnership is void.
(iv) Profit Sharing:
In the event of a partnership, the partners are required to share profit or loss according to an agreed-upon ratio or according to the Partnership Act of 1932, which requires them to share profit equally.
(v) Liability:
The liability of partners in a partnership is unlimited. If the partner has a responsibility to a third party, he will have to pay it out of his personal assets.