According to the chapter accounting for partnership, a partnership is defined as a relationship between two or more people who come together to establish a business and share its profits and losses. According to the Indian Partnership Act, a partnership is defined as a relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. There are certain features shared by all partnerships:
- Two or More Persons: A firm to be called a partnership must have two or more partners. According to Section 464, Companies Act 2013, the Central Government has the power to set a maximum number of partners in any partnership. The maximum number is 50.
- Agreement: Any partnership requires an agreement that forms the relationship between two or more people. The agreement can be oral or written even though the latter is preferable to avoid conflict in the future.
- Business: The intent of business is crucial to any partnership.
- Mutual Agency: A crucial aspect of a partnership, it implies that all partners have the right to participate in the business affairs of the firm.
- Sharing Profits: All firms/partnerships have an agreement to share all profits and losses.
- Liability of Partners: All partners are liable for the actions of the partnership, this means that any or every partner’s personal assets can be used to pay off debts accrued by the partnership.
Director at Samridhh Fincoach
The author loves writing on financial and economic matters. His writings are full of real life instances which enrich not only the readers knowledge but also his application of concepts
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