What is a Partnership in Business?

Questions and Answers

Two or more people (correct)

A written agreement

A business plan

One person

Each partner acts on behalf of the partnership (correct)

Partners have limited authority

Only the managing partner makes decisions

Each partner acts independently

Limited liability

Liability is nonexistent

Shared liability only for profits

Unlimited liability (correct)

It helps to avoid misunderstandings Signup and view all the answers

The name the business operates under Signup and view all the answers

Running a business for profit Signup and view all the answers

Indian Partnership Act 1932 Signup and view all the answers

Written agreement only Signup and view all the answers

Performing business activities together Signup and view all the answers

They might be used to settle debts Signup and view all the answers

Study Notes

A partnership is formed when two or more people decide to start and run a business together.
Partners share the profits and losses that the business makes.

A partnership requires at least two people, with a maximum of 50 in India.
A partnership is based on an agreement, which can be written or verbal, outlining how the business will be run, profit sharing, and other important details.
The agreement must be about running a business, not just owning assets together.
Mutual agency allows each partner to act on behalf of the whole partnership, making business deals binding on all partners.
Partners must agree to share both profits and losses of the business.

Each partner is fully responsible for the debts of the partnership, which means their personal assets can be used to pay off business debts if the business can't afford to.
This is known as unlimited liability.

A partnership is not seen as a separate legal "person" from the partners themselves, unlike a company.
The name under which the business operates is called the firm's name.
In India, the Indian Partnership Act 1932 governs how partnerships work, especially in cases of disagreements or unclear areas in the partners' agreement.