Q.Under Section 4 of the Indian Partnership Act, 1932, 'Partnership' is best defined as:
(A) A separate legal entity formed by two or more persons for carrying on business
(B) 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
(C) An agreement between two or more persons to jointly own property without carrying on any business
(D) A body corporate registered under the Companies Act, 2013

Section 4's definition has three components: an agreement, sharing of profits, and a business carried on by all or any of the partners acting for all.

A partnership is a relation, not a separate legal entity, and it requires an actual business to be carried on, not merely joint property ownership.

Why (B) is correct: Section 4 defines partnership word-for-word as '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.' This captures the three essential ideas: an agreement, profit-sharing, and mutual agency (business carried on by all or any of them, acting for all).

Why the distractors are wrong:

• (A) wrongly calls partnership a separate legal entity — a partnership firm under this Act has no separate legal personality distinct from its partners (see the Legal Status sub-topic).
• (C) describes mere co-ownership of property, which is not partnership at all unless a business is actually carried on with that property.
• (D) describes a company, an entirely different, separately incorporated legal form.

Students sometimes treat 'partnership' and 'firm' as interchangeable with 'company,' assuming a partnership is automatically a separate legal entity. Remember: under the Indian Partnership Act, 1932, the firm is only a collective name for its partners, never a distinct legal person.