1. Two or More Owners
The basic feature of a partnership is the presence of more than one owner of the business. Partnership is formed by two or more persons joining together to conduct a business within the legal framework of Indian Partnership Act of 1932. The maximum number of partners in a firm is legally restricted to 10 for banking business and 20 for non banking business.
2. Agreement
As stated in the definition a partnership business is based on the agreement between partners. This agreement should be in conformity with the provisions of Indian Partnership Act, 1932, which is the governing law for the partnership firms in India. From the legal point of view, it is not compulsory that the partnership agreement is made in writing. But it is a matter of common sense that the agreement is made in writing to avoid unnecessary dispute between partners in future. The written agreement between partners is known as Partnership Deed.
3. Business
The object of partnership is to conduct a lawful business. In the absence of such a business, an agreement between individuals will not become a partnership in the legal sense.
4. Sharing of profit
A business activity will result in profit or loss. This profit or loss has to be shared by the partners. Usually the profit sharing ratio will be mentioned in the partnership agreement. But if it is not mentioned in the agreement, the Partnership Act specifies that, the partners shall share profit or loss equally.
5. Mutual Agency
Mutual principal agency relationship is a special feature of a partnership business. Due to this relationship any act by a partner on behalf of the firm shall be automatically be binding on other partners also. Similarly any default of a partner shall be considered a default of all the partners.
Test
Yogita Ingle 6 years, 2 months ago
1. Two or More Owners
The basic feature of a partnership is the presence of more than one owner of the business. Partnership is formed by two or more persons joining together to conduct a business within the legal framework of Indian Partnership Act of 1932. The maximum number of partners in a firm is legally restricted to 10 for banking business and 20 for non banking business.
2. Agreement
As stated in the definition a partnership business is based on the agreement between partners. This agreement should be in conformity with the provisions of Indian Partnership Act, 1932, which is the governing law for the partnership firms in India. From the legal point of view, it is not compulsory that the partnership agreement is made in writing. But it is a matter of common sense that the agreement is made in writing to avoid unnecessary dispute between partners in future. The written agreement between partners is known as Partnership Deed.
3. Business
The object of partnership is to conduct a lawful business. In the absence of such a business, an agreement between individuals will not become a partnership in the legal sense.
4. Sharing of profit
A business activity will result in profit or loss. This profit or loss has to be shared by the partners. Usually the profit sharing ratio will be mentioned in the partnership agreement. But if it is not mentioned in the agreement, the Partnership Act specifies that, the partners shall share profit or loss equally.
5. Mutual Agency
Mutual principal agency relationship is a special feature of a partnership business. Due to this relationship any act by a partner on behalf of the firm shall be automatically be binding on other partners also. Similarly any default of a partner shall be considered a default of all the partners.
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