Definitions of Partnership.

A partnership is an association of two at more persons to carry on as co owners of a business and to share its profits and losses. Section 4 of the Partnership Act defines partnership as "the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all." Persons who have entered into partnership with one another are called individual partners and collectively a firm and the name under which their business is carried on is called the firm name. The salient features of partnership are as under 1. Formation: According to the Partnership Act of 1932, there is no special mode for the creation of a partnership. If persons between 2 and 20 (10 in case of banking business) enter into agreement oral or verbal for carrying on a business, with a private gain, then partnership is formed. To avoid misunderstanding, it is desirable that the articles ofpartnership be prepared in writing with legal assistance. The articles of partnershipshould cover the rights, duties, obligations and the arrangements which the parties havemutually agreed upon. It is not binding for partnership to be register. However, if a firm remains unregistered, it has to face certain disabilities or disadvantages. 2. Financing: The capital is made available to the firm by the partners as per terms of the agreement.It is not necessary that all the partners should contribute equally to the partnership. A person who has special skill or ability can be admitted to the partnership without any capital contribution. 3. Management: In a partnership business, every partner has a right to take part in its management. The important business decisions are taken with the consent of all other partners. 4. Restriction on Transfer of Interest: No partner can transfer his share to any other person without the prior consent or willingness of all other partners. 5. Unlimited Liability of Partners: The liability of the partners of a firm is unlimited. If the business suffers losses end the assets of the partnership are not sufficient to meet its obligations, then the creditors may chose to sue any one or all of the partners to satisfy the debt. This posses a serious handicap for the individual partners with large personal assets. He may be compelled to pay the entire debt of the partnership from his personal assets. 6. Duration: The partnership is a temporary form of business ownership. It operates at the pleasure of the partners. The partnership can come to an end, if a partners leaves, dies, declared bankrupt or insane. It is also dissolved by the partners by obtaining a decree from the court. 7. Taxation : If a firm is registered under the Income Tax Act, the profit of the firm is first divided among the partners and then assessed separately. In case, it is not registered within the meaning of Income Tax Act, the firm will be assessed on total profit. 8. Implied Authority : Each partner is an agent of the other partners and at the same time of the firm. This is an implied authority the moment the agreement is entered into between the partners,this authority automatically comes to each of the partners. The regular acts of business such as buying,

selling of goods, hiring of employees etc. by a partner is considered the act of the firm or the act of all the partners.Each partner thus is both an agent and a principal. As agent he has the capacity to bind other partners by his acts done. Each partner is principal in the sense that he is bound by the acts of other partners.