Define partnership. Explain any five features.
According to the Indian Partnership Act 1932, “Partnership between two or more persons who have agreed to share the profits of the business carried on by all or any of them acting for all”.
Features of partnership are
- Minimum two members are required to form a partnership firm and maximum 20 members are allowed. However, only 10 members are allowed in a banking business. According to section 464 of the Companies Act 2013, the number of persons in any association or partnership shall not exceed one hundred subject to the limit prescribed in the rules. In Rule 10 of the Companies Miscellaneous Rules 2014, no association or partnership shall be formed, consisting of more than 50 persons. Hence, the limit is now 50 partners to prescribe maximum number of partners in a firm but the prescribed number cannot be more than 100.
- Formation: The partnership form of business organisation is regulated by the Indian Partnership Act 1932.
- Agreement: The partners come to a mutual agreement to form a verbal or written partnership in. This document is known as partnership deed.
- Lawful business: A partnership may commence any lawful business activity. The partnership shall be formed only to perform legal business activity. Any robbery or smuggling between any two partners shall not be considered as partnership.
- Profit sharing: As per the agreement share ratio of the profit, the partners of the partnership firm share the profit of the firm. If the agreement does not specify the share ratio of the profit, the profit is divided equally among all the members.
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