What Is The Meaning Of Partnership?

The limitations of sole proprietorship form of organistation led to the formation of another form of organization known
aspartnership.
Definition:- In

India, partnership organization

is

formed

and

managed

by

Indian Partnership Act,

1932.

Section 4 of Partnership Act defines partnership as the relation between persons who have agreed to share profits of
a business carried on by all or any of them acting for all.

Minimum Requirement:-Minimum of 2 persons are required to form a

partnership and maximum of 10 personsin case of banking and 20 in case of others.
Features:1.
2.

The
At

least

3.
4.

relation
2

There
The

be

must

be

Every

can

Consensus

10.

some
to

and

be

i.e.

relation

on

earn

profits

and

mutual

or

agent

consent

of

is

is
other

on

between

of
share

of

among

partners.
applies.

is

unlimited.

partners

basis
during

for

all

transfer

contribution

business.

agency

the

required

contract.

of partnership firm.

undertaking

confidence

principal

the

the formation

liability

Restriction
No

for

of

trust

partner

based

required

Partners
Mutual

is

are

Law

7.

11.

persons

objective

6.

9.

partners

must

5.

8.

of

capital

of partnership.

the course

of

important

decisions.

of
and

share

business.

share.
of

profits.

12. Life span of partnership depends upon the will of partners.

Benefits
1.
2.

of Partnership:-

Formation

of partnership is

Flexibility

in

easy

as
the

it

does

not

operations

involve

too
of

many
the

legal

formalities.
business.

3.

Registration

of partnership form

4.

All

decisions

major

5.

are

Sharing

6.

of

organisation

taken

mutual

of

Unlimited

not

trust,

as

results

helps

of
liability

compulsory
which

risk

Relation

7.

by

is

in
in

in

better

case

of

company.

decision

in formation

effort
helps

the

making.
of capital.

and
more

reward.

credit

worthiness.

8. It protects the interest of minority as mutual consent i.e. consensus is required to take all the major decisions.
9. Easy to maintain secrecy as partnership firm is not under an obligation to disclose its annual accounts.
10. No legal formalities for dissolution.
Limitations:1.

Unlimited

2.

liability

increases

Limited

the

risk;

resources

this

hinders

for

the growth

of

business.

generating

capital.

3. No perpetual succession i.e. sudden death or retirement of any one of the partners dissolves the partnership.
4.

Lack

of

good

5.

faith

and

confidence

No

6.

among

partners

transfer

Burden

of

causes

great limitations.

of
law

shares.
of

agency.

7. Due to non-disclosure of accounts there is always a lack of public confidence

Suitability:1.

For

service

industry:-

Accounting,

2.

Medical,

Legal,

Transportation,

Medium

Warehousing

etc.

enterprises.

3. For distribution.
Types

of Partnership:-

1. General Partnership:- In this type of partnership, partners are with unlimited liabilities. It can be further divided
into

two

types:

(a) Partnership at Will:- Mutual trust, faith and confidence among partners are the key for the existence of this type
ofpartnership.
(b) Particular Partnership:- It is formed for a fixed duration or for specific tasks and it dissolves automatically as
soon as the fixed time lapses or the specific task is achieved.
2. Limited Partnership:- This type of partnership has been introduced in US, England and in other European
countries. All the partners in this type of partnership have limited liability except one partner.
Category: Business, Business & Finance, Business Law