Q.Define Partnership and state its important features.

Partnership is the relation between two or more persons who agree to carry on a lawful business and share its profits, acting as agents of one another. Essential features: (1) two or more persons, (2) an agreement, (3) a lawful business, (4) sharing of profits and losses, (5) mutual agency, and (6) unlimited liability.

Meaning

According to Section 4 of the Indian Partnership Act, 1932, partnership is 'the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.' The persons who enter into partnership are individually called 'partners' and collectively a 'firm', and the name under which they carry on business is the 'firm name'.

Essential Features

1. Two or more persons. At least two persons are required to form a partnership (maximum 50 as prescribed under the Companies Act rules).
2. Agreement. Partnership arises from an agreement among partners, which may be oral or written (a written agreement is called a partnership deed).
3. Lawful business. The partners must carry on some lawful business with the object of earning profit.
4. Sharing of profits and losses. The profits (and losses) of the business are shared among the partners in an agreed ratio; in the absence of agreement, equally. …