What is a Partnership in Business?

What is a Partnership?

• 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.

Key Features of a Partnership

• 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.

Liability of Partners

• 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.

Additional Notes

• 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.

A quiz on the definition and key features of a partnership, including the number of people required, agreement, and profit/loss sharing.