Partnership Form
When the quantum of business is expected to be moderate and the entrepreneur desires that the risk involved in the operation be shared, he or she may prefer a partnership. A partnership comes into existence when two or more persons agree to share the profits of a business, which they run together.
Definition of Partnership
When the quantum of business is expected to be moderate and the entrepreneur desires that the risk involved in the operation be shared, he or she may prefer a partnership. A partnership comes into existence when two or more persons agree to share the profits of a business, which they run together.
This business may be carried on by all or by any of them acting for all. Those who, thus, enter into an agreement are individually called as ‘partners’ and collectively they are called as ‘firm’. Partnership is the outcome of a voluntary agreement between the persons, who after the agreement has been arrived at, would be known as partners.
A partnership is a form of business organization in which two or more persons join together to undertake some form of business activity.
Main Features
- Ease of formation as compared to a company
- Partnership is an association of two or more persons who have joined together to share the profits of business
- Partners contribute to capital and share the responsibility of running the business
- Partnership is based on contractual relationship and created by an agreement between persons called 'partners'
- Principal-agent relationship - The business may be carried on by all or one or more partners acting for all the partners
- Risk of implied authority as each partner acts as an agent of the firm and his acts would bind the firm and all remaining partners
- In respect of business debts, each partner has unlimited liability
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