It is one of the most important forms of a business organization, where two or more people come together to form a business and divide the profits thereof in an agreed ratio. The proprietorship form of ownership suffers from certain limitations such as limited resources, limited skill and unlimited liability. Expansion in business requires more capital and managerial skills and also involves more risk.A Partnership is easy to form, and the compliance is minimal as compared to companies.
There are two types of Partnership firms, registered and un-registered Partnership firm. It is not compulsory to register a Partnership firm; however, it is advisable to register a Partnership firm due to the added advantages. Partnership firms are created by drafting a Partnership deed amongst the Partners and trademarkkaro can help start a registered or un-registered Partnership firm in India.
Following are the characteristics of Partnership Firm:
1. Number of Partners :
Minimum number of person required to start a partnership firm is two and maximum limit is 10 in case of banking business and 20 in case of all other types of business.
2. Contractual relationship :
A written agreement known as partnership deed which is signed by all the partners, binds them in a contractual relationship.
3. Voluntary Registration :
Registration of partnership firm is not compulsory. Since the registration provides various benefits to the firm thus it is desirable.
4. Competence of Partners :
Every partner must be competent enough to enter into the partnership agreement. He should not be minor (in some cases minor can be admitted only to the benefits of the partnership), lunatic or insolvent.
5. Sharing of Profit and Loss :
In partnership firm all the profits and losses are shared by the partners in any ratio as agreed. If it is not given then they share it equally.
6. Unlimited Liability :
Liability of partners of a partnership firm is unlimited. They are jointly held liable for the debts and losses of the firm.
7. Legal Status :
Partnership firm has no distinct legal status separate from its partners.
8. Transfer of Interest :
No partner can transfer its interest in the firm to anybody without the consent of other partners.
9. Principal – Agent Relationship:
This relationship is based on mutual trust and faith among the partners in the interest of the firm. Business of the firm may be carried on by all the partners or any one of them acting for all. According to this, every partner is an agent when he is working on behalf of other partners and he is the principal when other partners act on his behalf.