Features of partnership

A typical partnership form of business will always have the following basic features.

1. Agreement

The definition of the partnership itself makes it clear that there must exist an agreement between partners to work together and share profits amongst them. Partners may make such an agreement either orally or in writing. If it exists in written form, we refer to such an agreement as a partnership deed.

2. Business

The existence of a business is an essential feature of partnerships. There can be no formal partnership under the Partnership Act if the partners carry out charitable activities. Section 2 says that business includes any trade, profession or occupation. What is essential is that the firm must work with the intention of earning profits.

3. Profit sharing

A partnership does not exist unless partners share the profits of their firm. A person who works for the partnership business without having a share in its profits may be an employee, but not a partner. It is noteworthy to point out that the law only requires the sharing of profits amongst partners. Consequently, all partners need not share losses as well.

• The partnership firm can be a legally-recognized entity, unlike sole proprietorships wherein the owner and business are treated alike.
• The partnership firm must conduct some form of business. Companies, however, can exist for conducting purely charitable objectives as well.