Characteristics of the partnership company (2023)

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Everything you need to know about the features and characteristics of a partnership company.The partnership is a form of business that arose due to the shortcomings of the sole proprietorship.

As the business grows and prospers, one person is not enough to raise capital and take care of day-to-day operations. In such a scenario, more people join hands and contribute their funds and other skills to run the business. Thus, the partnership is an extension of the sole proprietorship.

A partnership is an association of two or more people who have mutually decided to do business together and share their profits and losses. The articles of association can be concluded in writing or orally.


Some of the characteristics of the partnership are:-

1. Two or more persons 2. Agreement 3. Lawful business 4. Registration 5. Profit sharing 6. Agency relationship 7. Unlimited liability 8. No separate legal entity 9. Transfer of interest

10. Mutual trust and trust 11. Number of partners 12. Profit sharing 13. Principal-agent relationship 14. Common ownership 15. Ownership and control 16. Registration 17. Duration 18. Capital and some others.

Characteristics and Characteristics of Partnership Company: Legal Business, Agreement, Profit Sharing, Joint Ownership and some others

Characteristics of the partnership company: 10 important characteristics

The main characteristics of a partnership company can be listed as follows:


1. Two or more people:

At least two people must pool resources to form a partnership. The Partnership Act 1932 does not set a maximum limit on the number of partners. However, the Companies Act 1956 states that any partnership or association of more than 10 persons in the case of banking and 20 persons in other types of business is illegal unless incorporated as a public company.

2. Agreement:

A partnership comes about through an agreement between persons capable of entering into a contract (e.g. minors, insane persons, insolvency administrators, etc. not entitled to participate). The agreement can be oral, written or tacit. However, it is about putting everything in black and white and clearing the fog around all tricky topics.


3. Legitimate Business:

The shareholders can only take up legally sanctioned activities. Any illegal activity by affiliates will not be sanctioned by law.

4. Registration:

According to the law, the registration of a company is not compulsory. (Registration is voluntary in most states of India). However, if the company is not registered, certain legal benefits cannot be obtained. The consequences of not registering are: (i) the Company cannot take legal action against other parties to settle claims and (ii) in the event of a dispute between partners, it is not possible to settle the disputes through a court.

5. Profit sharing:

The articles of association must specify the manner in which profits and losses are to be shared among the partners. A non-profit clinic, educational institution run jointly by like-minded people is not to be regarded as a partnership as there is no profit or loss sharing. However, mere profit-sharing is not conclusive evidence of a partnership. In this sense, employees or creditors who share profits cannot be called partners unless there is an agreement between the partners.

6. Agency Relationship:

In general, each partner is considered to be a representative of the firm as well as other partners. The partners have an agency relationship with each other. The deal can be done jointly by a nominated partner on behalf of all. Any action taken by a Nominated Associate in good faith and on behalf of the Firm shall be binding on other Associates as well as the Firm.

7. Unlimited Liability:


All partners are jointly and severally responsible for all activities of the partnership. In other words, in all cases where the company's assets are insufficient to meet the obligations of the company's creditors, the private assets of the shareholders can also be seized. Creditors can reach any partner - who is financially sound - and have their claims satisfied.

8. No Separate Legal Entity:

The company has no personality of its own. The deal ends in the event of the death, bankruptcy or insanity of one of the partners.

9. Interest transfer:


A partner cannot transfer its interest in the company to outsiders unless all other partners agree unanimously. A partner is an agent of the company and is not authorized to unilaterally transfer its interest to outsiders.

10. Mutual trust and trust:

A partnership is based on the principle of mutual trust, confidence and understanding between the partners. Each partner should act for the benefit of all. When trust is broken and partners work past each other, the firm is crushed under its own weight.

featuresof partnership company – agreement, number of partners, legitimate business, profit sharing, principal-agent relationship, unlimited liability and some others

The characteristics or characteristics of a partnership company are given as follows:


1. Agreement:

The partnership is the result of a contract or agreement made between or among the partners. It does not result from birth, status or inheritance or succession. The contract or agreement between the persons can be made orally or in writing. But usually the contract is in writing.

2. Number of partners:

Section 11 of the Indian Partnerships Act 1932 provides that where a partnership firm is engaged in banking business the maximum number of persons a firm can have is 10. In the case of partnerships conducting other business, the number of partners can be 20. If the number of shareholders exceeds the above limit, the company becomes an illegal association.

3. Legitimate Business:

The goal of a partnership should be to make a profit by only engaging in legitimate business activities. The partnership business should correspond to the Basic Law. An association formed to carry out illegal activities such as theft, bootlegging and smuggling cannot be called a partnership.


4. Profit Sharing:

The main goal of the partnership is to generate profits and share the profits according to the agreed ratio. If the partnership agreement does not contain a profit-sharing clause, the partners share the profits equally according to the rules of the Indian Partnership Act of 1932. The non-profit organization cannot be described as a partnership.

5. Principal-Agent Relationship:

Each partner acts in dual capacity, i.e. he is both principal and agent. As a representative, he can bind the other shareholders through his actions and as a client; he is bound by the actions of other partners. Each partner has the right to deal with outsiders in its capacity as principal and with other partners, each partner is an agent.

6. Unlimited Liability:

In India, all partnership companies are general partnerships and the liability of each partner is unlimited i.e. H. all partners are jointly responsible for paying company debts and even their personal property can be used to collect company debts.


7. Co-ownership:

Each partner is a co-owner of the law firm's assets and therefore the law firm and the partners are legally considered to be one and the same. Partnership has no separate existence apart from the partners that make it up.

8. Highest good faith:

It signifies the trust and confidence of the partners in each other. Each partner must work in the best interest of the company. He must strive to gain and maintain the good faith of his associates. The partner must not secretly make a profit and must disclose all information directly or indirectly related to the business.

9. Non-transferability of interest:

A partner cannot transfer its interest in the company to an outsider without the consent of other partners. There is a strict entry and exit restriction for partners. Any changes affecting the partners will be made according to the agreement and/or with the consent of all partners.


Characteristics of partnership company – 12 characteristics: ownership, mutual trust and trust, registration, duration, capital, no separate individuality and some others

Characteristics of the partnership form of organization are discussed as follows:

1. Two or more people:

At least two people are required to set up a partnership organization form. Although the maximum number of partners is not specified in the Partnership Act 1932, the Companies Act states that in banking the maximum number of partners can be 10 (ten) and in non-banking the limit is 20 partners.

2. Contract or Agreement:

A partnership is an agreement between two or more people to run a business and make a profit. This agreement may be oral, written, express or implied.


3. Legitimate Business:

The purpose of the articles of incorporation is to run a business legally permitted by the government and make a profit. A partnership to carry out a charitable or social work or an illegal activity, e.g. B. black market or smuggling, is not included.

4. Profit and Loss Sharing:

In the partnership organization, the partners share the profits according to the shares stipulated in the partnership agreement. If the company is threatened with a loss, this is shared proportionately.

5. Liability:

As with sole proprietorships, the liability of the shareholders is unlimited. Partners are individually and collectively liable to the firm's creditors. Therefore, the creditors have the right to claim their claims from the private assets of one or all shareholders if the company's assets are insufficient.

6. Ownership and Control:

Every shareholder has the right to participate in the management. The ownership and control rights are therefore jointly owned by the shareholders. All major decisions require the unanimous consent of all partners.

7. Mutual trust and trust:

Mutual trust forms the necessary basis for the partnership agreement. Each Partner is expected to act in the best interests of the other Partners and also of the Company. He must always act in good faith when dealing with his fellow partners. He must give truthful account of himself and must not make secret profits from the Company's affairs or establish a competing business.

8. Limitation of transfer of interests:

If a shareholder wishes to transfer his share of the arrangement or if a shareholder wishes to withdraw from it, he can only do so with the consent of all other shareholders. Thus, a shareholder cannot transfer his share of his own volition.

9. Registration:

In order to set up a partnership, registration is not mandatory. However, if the partners decide to do so, it can be registered with the Registrar of Firms.

10. Duration:

The partnership company remains in place, to the delight of the partners. Legally, a partnership ends when one partner dies, retires or becomes insolvent. However, if the remaining partners agree to work together under the original firm's name, the firm will not be dissolved and will continue in business after the outgoing partner's claims have been settled.

11. Capital:

The company's finances or capital are brought in by the shareholders in the agreed ratio. Experts can be admitted to a company without a capital contribution.

12. No Separate Individuality:

A partnership organization does not have a separate entity from its partners. All contracts and agreements apply to both partners and the company.

Characteristics of partnership company – incorporation, liability, risk-taking, decision-making, control, continuity, membership and mutual representation

(i) Education:

The partnership is governed by the Indian Partnership Act 1932. It is formed by a legal agreement which sets out the terms of the relationship between the partners, the sharing of profits and losses and the manner of conducting business. It should be noted that the business must be operated lawfully and for profit. Two people who join together for charitable purposes therefore do not constitute a partnership.

(ii) Liability:

The shareholders of a company have unlimited liability. The private assets can be used to pay off debts if the business assets are not sufficient. In addition, the partners are jointly and severally and individually liable for the payment of debts.

All shareholders are jointly and severally liable for the debts and contribute according to their share of the business and are liable in this respect.

Each partner can be held individually responsible for paying off the company's debts. However, such a shareholder can later reclaim an amount of money from other shareholders that corresponds to the liability shares specified in the articles of association.

(iii) Risikotragung:

The shareholders bear the risks of corporate management as a team. The reward comes in the form of profits, which are shared by the partners in an agreed ratio. However, they also share losses in equal proportion in case the company suffers losses.

(iv) Decision Making and Control:

The activities of a partnership company are controlled by the joint effort of all partners. The partners share decision-making responsibility and control of day-to-day business. Decisions are always made by consensus.

(v) continuity:

The partnership ends upon the death, retirement, bankruptcy, or insanity of one partner. However, the remaining shareholders can continue the business on the basis of a new agreement.

(vi) Membership:

The minimum number of members required to form a partnership company is two, while the maximum is ten in the case of banking and twenty in the case of other businesses.

(vii) Mutual Agency:

The company business can be operated by all or one of the partners acting on behalf of all. In other words, each partner is both agent and principal. He is a representative of other partners since he represents them and thereby binds them through his actions. He is a principal because he too can be bound by the actions of other partners.

Characteristics of the partnership company – incorporation, finances, control, administration of affairs, duration of the partnership, taxation and joint ownership

1. Education:

Although a partnership is formed by a contract between the partners, no legal formalities are required for its formation. A verbal contract is sufficient to bring it about. However, it is advisable to reduce the agreement to the written form and prepare a properly drafted partnership deed or memorandum of association setting out the terms of the partnership and the rights, duties and obligations of the partners.

Registration of a partnership company is not mandatory under our law, nor is there a penalty for failure to register. However, the law introduces certain disabilities that will eventually require registration. In fact, the law has effectively ensured company registration without making it mandatory. The first impediment is that an unregistered firm cannot bring an action or other legal process to enforce a right under a contract.

Second, a partner cannot see that the firm or other partners are created under a contract or conferred by partnership law. But an outsider can sue an unregistered company and its affiliates.

2. Finances:

Normally, the capital of a partnership consists of the contributions of the various partners. The capital contributions of all shareholders need not be equal, and one or more may not contribute any capital at all. This happens where such partners contribute special skills and abilities. Initial capital can be increased or increased for business expansion by borrowing on the security of company property and also on the strength of partners' personal wealth.

3. Control:

Since the partnership arises from a contract, control depends on its terms. When all partners are actively involved in running the partnership business, control rests with all of them. All major decisions must be made by the unanimous consent of all partners. However, there may be some partners who do not actively participate in running the business. They are known as dormant or dormant or secret partners. In a word, control is usually shared between the active or ostensible partners.

4. Management:

According to the law, each shareholder has the right to participate in the management and conduct of the law firm's affairs. In practice, the partnership agreement provides for a division of labor between the various partners according to their experience and knowledge. It is not uncommon to have one of them as a senior partner, holding the position of chief executive and exercising overall oversight.

5. Duration of partnership:

The partners are free to determine the duration of the partnership or to say nothing about it. When they agree to run the business for a specific period of time, it is called a temporary partnership. After the end of the term, the partnership ends; but if the business is continued after the expiry of the period originally set, the renewed company becomes a company at will.

When a partnership is struck for a specific adventure, it is said to be a specific partnership, which would presumably last until the deal is finalized. If the partners say nothing about the duration or agree to run the business for as long as they wish, the partnership will be one at will. It can be dissolved at the request of a partner upon termination. If the shareholders cannot agree on the dissolution of the law firm, the court can order its dissolution upon application.

6. Taxation:

A partnership is liable to pay income tax and other taxes like a natural person. However, there is a slight difference in terms of the tax rate depending on whether the company is registered under the Income Tax Act or not. With such a registration (apart from the registration according to the partnership law), the income is divided between the partners and each partner is assessed separately. If the company is not registered, the company must pay tax on its total profits, separate from the income of the individual partners.

7. Co-ownership:

Each shareholder is a co-owner of the company's assets and has an equal share in them, unless different shares are agreed. The assets of the law firm are to be used exclusively for the purposes of the company.

Partnership Company Characteristics – 7 Main Characteristics: Two or more persons, Agreement, Legal Business, Profit Sharing, Mutual Representation and some others

The main characteristics of the partnership company are as follows:

1. Two or more people:

There must be at least two people to set up a partnership. The maximum number of persons that can be admitted to a partnership is twenty and ten if the company is engaged in banking business.

2. Agreement:

There must be an agreement establishing a partnership, known as a partnership deed. A partnership arises from an agreement between two or more persons who are capable of contracting under the Indian Contracts Act 1872. The agreement can be made in writing or orally. To avoid future disputes and disagreements, a written agreement is desirable.

3. Legitimate Business:

The partnership is formed to carry on lawful business, trade or profession that results in gain or profit. The partnership can therefore not conduct any business, illegal and illegal activities prohibited by law.

4. Profit Sharing:

There must be an agreement between the partners to share the profits and losses of the business of a partnership in an agreed ratio. This is one of the basic elements of the partnership. When two or more people jointly own property and share its income, this is not treated as a partnership. The profit-sharing ratio is usually specified in the contract. In the absence of a profit-sharing quota, all partners share profits and losses equally.

5. Mutual Representation (i.e. principal-agent relationship):

The law firm's business can be managed by all or one or more partners acting for all. Every shareholder is entitled to take part in the management of the company. A Partner may be authorized by other Partners to administer the Company's activities on their behalf. In this case, all partners are bound by his actions. Therefore, each partner is both agent and principal. A partner is an agent for other partners and a principal for itself.

6. No separate legal existence:

A partnership has no separate or distinct legal personality or life. Law firm and partner are inextricably linked.

7. Unlimited Liability:

The liability of the shareholders is unlimited. All partners are jointly and severally liable regardless of their contributed capital. There is no difference between the ownership of the company and the ownership of individual shareholders, i. H. the personal property of the partners is always at stake. In the event of damage, the partners are obliged to pay for the damage if necessary from their private assets or personal assets.

Characteristics of partnership company – number of members, existence of business, contractual relationship, legal deal, agency relationship, unlimited liability and some others

1. Number of members / two or more people:

At least two people are required to set up the partnership company. There is a limit on the maximum number of partners. A banking company can have a maximum of ten partners, while other companies can have a maximum of twenty partners.

2. Existence of the business:

The shareholders have to do business. If they join together to carry out a social, religious or charitable work, such an association cannot be called a partnership.

3. Contractual relationship:

The relationship between partners arises from a contract and not from a status as in the Joint Hindu Family. There must be an agreement between the partners, which may be oral, written or tacit. Only persons with legal capacity can enter into a partnership agreement. Minors, insane, insolvent, insane may not enter into a valid contract.

4. Law / legal transactions:

All partners must agree to conduct only legal or lawful business. Under the Partnership Act 1932, no unlawful dealings are permitted.

5. Agency Relationship:

There is an agency relationship between all partners. The existence of the partnership is based exclusively on this mediation relationship. The business of the partnership can be carried out jointly by all partners or by each for others. This implies that each partner is a representative of all other partners in the firm.

6. Unlimited Liability:

As with sole proprietorships, the liability of the shareholders is unlimited. The partners are personally liable for the obligations of the law firm. Due to contractual relationships between the partners of the law firm, they are all jointly and severally liable for all debts and liabilities of the law firm. Your personal wealth, personal property, wealth and property are liable for the debts of the corporations in the event that the corporations' assets are insufficient to pay the debts or debts of the corporations.

7. Profit Sharing:

Every partnership must have the purpose of sharing the profits from the business activity. And to do this, an agreement must be reached to share the profit and loss of the company's business. Profit-sharing is not a real test of partnership, employees and creditors also share profits, but without an agreement on partnership they cannot be called partners.

8. Transfer of Shares:

A partner is not permitted to sell or transfer its interest to an outsider without the consent of other partners. Free transferability of shares is not possible in partnerships.

9. Principal and Agent Role:

Partners act simultaneously as principal and agent. To a third party or outsider, a partner is a principal and to a partner of the firm, he is only an agent.

10. High team spirit and motivation:

The essence of a partnership is high team spirit, high motivation, mutual trust, cooperation and trust in one another. All this gives the partnership society a long survival and also ensures the unity.

11. Legal status:

Partnership company and partner are inextricably linked. They have no separate legal personality from the Company's business. A partnership can be terminated by the death or insolvency of a partner.

12. Taxation:

The Income Tax Act has imposed some taxes on partnerships. Different taxes apply to different types of partnerships. In the case of a registered company, the profits are divided among the shareholders and the income of the shareholders is taxed individually. And if the company is not registered, all income it generates will be taxed.

Characteristics of the partnershipCompany – number of partners, unlimited liability, deed, profit making and distribution and limitation of transfer of interest

(i) Number of partners:

It is essential for the partnership that there are at least two members. If anything, due to any circumstances, membership amounts to one thing, it would be compulsory dissolution of a partnership. In this situation, it would only be a pure merchant ship.

The Indian Partnerships Act 1932 does not specify the maximum number of partners, but this evil was remedied by the Indian Companies Act 1956 which emphasizes in Section 11 that there can be a maximum of 20 members in the case of an ordinary banking and insurance business must not exceed this numberover 10.

(ii) Unlimited Liability:

As with sole proprietorships, the liability of the partners in partnerships is unlimited. Therefore, they are not only liable up to their invested capital, but also with their personal property.

(iii) Certificate:

Under the Indian Partnership Act 1932, it is imperative that some form of contract or instrument exist between the partners. It can be in writing or oral, but if it's written, it's better. All the terms of the corporate deal are set out in this deed at the beginning of the deal to avoid any kind of dispute in the future.

The content of the instrument generally includes documents related to:

(a) Company name and address, bearing in mind that it should not resemble any other existing name and should not be like Crown, Emperor, Empress, Imperial, King, Queen, King or Parliament etc. ;

(b) name and address of partners;

(c) line of business;

(d) type of business;

(e) duration of partnership;

(f) capital invested by partners;

(g) Loans to and from Partners;

(h) share of profit and loss;

(i) inspection of the ledger; and

(j) Dissolution of Partnership.

(iv) Earning Profits and Distribution:

The main purpose of the partnership is to generate profits and distribute them among the partners. Any purpose other than profit-making cannot be called a partnership, the aim of which is to serve society in any way.

(v) Limitation of Transfer of Interest:

No shareholder can transfer his share to anyone without the prior consent of other shareholders. This requires a consensus between the partners.

Now that you know certain characteristics of the partnership, let us know who can be a partner. Can anyone have a partner? no Under the Indian Partnership Act 1932 (Sec. 30) any person who (1) is not under the age of 18 (2) should be of sound mind (3) not between declaration of bankruptcy and (4) should not have been the person of the enemy country be. A minor can also be a shareholder but only to share the profits and has no access to the books of account.

Partnership is one such form of business organization that is easy to set up. In contrast to a sole proprietorship, an enormous amount of capital can be invested in a partnership. It increases business efficiency as synergies are developed due to the combined efforts of many minds.

With many partners, the credit rating is increased and you can take more risks. But the position of the partnership lies between the corporation and the sole proprietorship. Compared to corporations, the means and sources are limited for fear of mutual conflicts. As with a sole proprietorship, your liability remains unlimited and there is also a restriction on the transfer of shares without permission, which does not offer the kind of freedom of a corporation. All these reasons paved the way for the birth of another form of business organization, namely joint-stock companies.

Characteristics of the partnership company – incorporation, financing, control, administration, duration and taxation

Feature #1. Formation:

Since the partnership is based on a contract between people, its formation does not entail any particular legal problems. Generally, the memorandum of association is set out in writing and a memorandum of association is drawn up, setting out the terms and conditions of the company and the rights, duties and obligations of the partners.

Since there may be future bad blood and disagreements between partners (money is a major parting factor), legal assistance can be sought from a solicitor in the drafting of the deed.

The law does not make incorporation of a partnership compulsory, but incorporation becomes necessary because the firm faces certain disabilities if unincorporated. The most serious of these is that an unregistered company cannot bring an action to enforce rights against third parties where such rights arise under a contract.

Likewise, a partner cannot file a lawsuit to enforce its rights against the company and other partners under the partnership deed. For these reasons, registration with the commercial register can be considered part of the formation process for partnerships.

special feature #2. Financing:

The capital of the partnership consists of the contributions of various partners. The capital contributions of the shareholders do not necessarily have to be in proportion to their profit sharing. Sometimes a partner can be admitted to the partnership without a capital contribution.

This is usually accepted for those partners who bring special skills, abilities or contacts to the partnership organisation. A partnership may supplement its initial finances by borrowing from outsiders, but such borrowing is done on the basis of the security of the partners' corporate property and personal assets.

special feature #3. Control:

In a partnership where all partners are active, everyone is in control. No important business decision can be made without the unanimous will of all partners. In some companies only one or two partners are active and the rest are asleep or resting.

The sleeping or dormant partners do not actively participate in the running of the firm. But the right of such partners to control the functioning of the company cannot be denied. In short, control is shared between the partners in a firm.

special feature #4. Management:

The law gives each partner the right to actively participate in the management of the law firm's affairs. Each partner has the authority to bind the company and other partners through its actions in the ordinary course of business. Each company is free to choose a management pattern by agreement between the partners. In many cases, a managing partner takes care of the work of the company (and its departments, if any) as managing director.

In some others, the partners share management areas among themselves, e.g. For example, one partner can take care of the factory, the other can take care of purchasing, the third can take care of sales, and so on. If a company has branches in the same city or in other cities, each partner can be entrusted with the management of each branch. Of course, decisions on important questions about goals, policies and programs are made jointly by them.

special feature #5. Duration:

The partnership company will be continued to the delight of the partners. Legally, a partnership ends when one of the partners dies, retires, or becomes insolvent. However, if the remaining partners agree to work together under the original company name and style, the company will not be dissolved and will continue in business after the departing partner's claim is asserted.

Indian partnership law sets out the circumstances under which a company will be dissolved e.g. B. if the business becomes illegal or if all partners (or all but one) become insolvent. The court also has the power to order the winding up of the firm in certain circumstances, e.g. B. if the company can only be continued at a loss or the shareholder becomes incompetent, etc.

special feature #6. Taxation:

Das Einkommen einer Personengesellschaft wird wie das Einkommen einer Einzelperson nach dem Plattensystem besteuert. Der Steuersatz steigt mit zunehmendem Einkommen progressiv an. Wenn die Firma nach dem Einkommensteuergesetz registriert ist (im Unterschied zur Registrierung nach dem Indian Partnership Act), wird das Einkommen der Firma unter den Partnern aufgeteilt und jeder Partner wird separat zur Einkommensteuer veranlagt. Wenn die Firma jedoch nicht registriert ist, muss die Firma ihre Gewinne getrennt von den Einkommen der Partner versteuern.

Characteristics of the partnership company – diversity of people,contractual relationship,no separate legal entity,Unlimited liability,existence of companies and a few others

(i) Majority of persons:

A partnership is an association of two or more people. The limit on the maximum number varies from country to country. In India there is no cap in the Partnership Act; but the Companies Act 1956 indirectly set the limit. Accordingly, the maximum membership for a trading company is 20; for banking transactions it is 10.

(ii) contractual relationship:

A partnership is the result of a contractual relationship between two or more people. The company relationship therefore results from the contract and not from the status. The contract can be made orally or in writing, but in practice a written agreement is made, as this will be helpful in resolving any disputes that may arise later.

(iii) No separate legal entity:

A partnership does not have its own legal entity. Law firm and partner are inextricably linked. The liability of the company becomes the personal liability of the partners. At the same time, the death, retirement or insolvency of partners have a direct impact on the partnership.

(iv) Unlimited liability:

The partners have unlimited liability as joint and several debtors for all debts and liabilities of the law firm. This means that creditors can collect their claims from the assets of one or all of the partners if the companies' assets are not sufficient to meet the obligations. However, after a partner has paid contributions from their private assets, they can request a proportionate contribution from all other partners.

(v) Existence of business:

Partnership presupposes business, and where there is no business there is no partnership. It must be made clear that a partnership is not an association or non-profit association and its primary purpose is to conduct legitimate and for-profit business.

(vi) Profit Sharing:

A partnership is formed to conduct business with the aim of making profits and dividing them among all partners. Unless otherwise agreed, profits are to be shared equally by all partners. It should be noted that the sharing of losses by the partner is implied. However, an affiliate may join a company on condition that they do not share any losses; however, this does not mean that he is not personally liable without limitation.

(vii) General agency system:

There is a system of general agency in partnership. Each shareholder is the general representative of the law firm and his fellow shareholders. It follows that a partner can act as principal and agent of the firm at the same time. For third parties, the partner is a principal, while for other partners it is an agent.

(viii) Joint management:

Legally, every shareholder has the right to participate in the management of the company. In practice, however, it is not necessary for all partners to participate in the day-to-day activities of the company. When partnership businesses are operated by some partners; Important decisions require the consent of all partners.

(ix) Limitation of transfer of interest:

No shareholder can transfer his share in the company to another without the consent of the other shareholders. This limitation on interest portability is based on the principle of law that prohibits a delegated agenda item from delegating its powers. Being an agent himself and being a partner in the firm, he cannot delegate his powers to outsiders.

(x) Highest good faith:

The survival of a partnership society depends on the utmost good faith and selflessness. The essence of a partnership is team spirit and cooperation. All partners must be fair and faithful to one another and must provide truthful information about conducting partnership business. One partner acts as trustee of other partners. He has a moral and legal obligation to be honest and truthful in his dealings with other partners.

Characteristics of the partnership company – majority of persons, limitation of the number of partners, contractual relationship, only individuals can become partners and some others

1. Majority of persons:

A person cannot have a partnership. It is a joint effort of at least two people to form a partnership. A partnership is essentially a contract between one or more people in relation to a company. The two people entering into a partnership should have the legal capacity to enter into a contract. For example, a father and his minor son cannot form a partnership.

2. Restriction on the number of partners:

Unlike a joint Hindu family or a cooperative, there is a limitation on the maximum number of people who can form a partnership. The number of partners must not exceed 20 people, for banking transactions the maximum number of partners is limited to 10 people.

3. Contractual relationship:

The partners' relationship is bound by the legal agreement or contract entered into by each of them. This agreement is referred to as the “Deed of Partnership”. The partnership can be established by either verbal or written agreement to the terms. There is no legal obligation to register a partnership deed, but it is in the interest of partners to register the deed.

In the event of disputes between the shareholders, verbal agreements can no longer be enforced in court in the future. Therefore, a written company charter would serve the interests of all shareholders.

4. Only individuals can become partners:

Although this may seem obvious, we will later understand that in other organizational forms non-individuals can also become owners of the company. In a partnership, only natural persons can become partners. Artificial entities such as banks, cooperatives, other partnerships, etc. cannot become "partners".

5. Unique Name:

The partnership company should have a name that makes it recognizable. For example, if A and B start a partnership company, they might want to name it AB and Company. When two brothers Ram Sharma and Shyam Sharma form a partnership, they may wish to name it Sharma Brothers. The partnership is entered in the commercial register under this name.

6. Business:

A partnership is formed with the intention of doing business. The activities carried out should have the characteristics of a company.

Two or more persons joining together for the purpose of carrying out charitable acts cannot be regarded as a partnership. In addition, the deal must be in the present and not sometime in the future. Business goals can be diverse. However, the business carried out should be lawful.

7. Profit Sharing:

The intention of the partners is to make profits through joint efforts. The profits made are shared between the partners according to the terms they have agreed upon. Any losses from business transactions are also borne by the partners. A profit or loss sharing based on the capital contributions of the shareholders is not required. The profit and loss sharing ratio between the partners may deviate from the capital contribution ratio depending on the mutual agreement between the partners.

8. Collective Management:

A partnership is an agreement to do business together. Each partner is therefore entitled to participate in the day-to-day management of the company. Decisions are made by consensus. In other words, no major business decision can be made without the unanimous will of all partners. However, responsibilities are divided among the partners. One person can run the business for others.

9. Principal-Agent Relationship:

Each partner is both an agent and a principal of the partnership company. The partner is a principal because it is responsible for its own actions and the actions of other partners. He is a representative of the company as he can act on behalf of other partners and bind them with his actions. It is possible that some partners are not actively involved in the business while others are actively involved in the business.

10. Joint and several liability:

Each partner is liable for all liabilities of the law firm. If the assets of the company are not sufficient to meet the claims of the company's creditors, the personal property of one, all or a few partners can be used for this purpose. It does not matter that the shareholder whose personal assets are being attached had nothing to do with the management of the company and the decision that led to the claim. Each partner is therefore jointly and severally liable.

For example, let's say X, Y and Z enter into a partnership by contributing Rs. 100,000 each. X and Y are wealthy businessmen, while Z comes from a middle-class family. Z is the person who has many ideas to make profit. Z goes to a bank and borrows 500,000 rupees for the deal. Unfortunately, the business suffers a huge loss.

The bank has the right to claim their money from all 3 partners. This is what we mean by joint liability. X and Y cannot say that Z did not consult them or that they did not sign the loan document.

It's also possible that the bank decides to collect all of X and Y's money, realizing that Z has no assets and chasing him for money is futile. X and Y cannot say that they are only liable for 2/3 of the loan and that the bank should collect the balance from Z. X and Y are obliged to repay the entire loan. This is what we mean by "multiple" liability.

11. Limitation of transfer of interest:

A Partner is not at liberty to transfer its interest in the Company to anyone. In other words, if a partner wishes to resign from the partnership and wants his friend to take his place in the partnership, he cannot do so unilaterally. He must obtain the consent of other partners before such a transfer, as the partnership is a contract between individual partners.

If a shareholder no longer wishes to remain a shareholder, he can sell his share in the company either to existing shareholders or to third parties only after obtaining the consent of other shareholders. If no shareholder or a third party is willing to acquire his share in the company, he can notify the company of the dissolution.

12. Highest Good Faith:

Partners can bind each other through their actions. Therefore, each affiliate must be faithful to all other affiliates and disclose any information in their possession to the other affiliates. Therefore, utmost good faith is very important as business cannot be conducted without mutual trust.

13. Flexibility:

The partnership is regulated by the “Partnership Deed”, which allows the partners sufficient operational flexibility. The deed may also be amended to meet the needs of changing terms and conditions. The nature and scope of the business can be changed in a short period of time. No approvals from any authority are required.

14. Limited Lifetime:

Partnership is a relationship between partners. It is dissolved upon each death, bankruptcy or retirement of a partner. A new social contract must be prepared. Therefore, partnerships do not have a very long lifespan.

15. No Separate Legal Entity:

The partnership company is not separate or separate from its members. It has no legal personality of its own. Partners enter into contracts on behalf of each other.

16. Capital contribution of the shareholders:

Typically, partners come together to run a business, contribute capital to the business, and share the profits made by the business in proportion to the capital contributed. However, this does not always have to be the case. A person may be offered a partnership even if that person does not contribute any capital. The profit-sharing ratio and the capital contribution ratio do not have to be identical.

For example, A, B, and C decide to start a company to create various apps (mobile applications) for smartphones. While A and B bring in 100,000 rupees each, C brings in no money. However, C is the person who understands the business better and will actually help the company build the technology platforms.

A and B just follow what C says because they are not very knowledgeable about mobile technology. Thus, all 3 share the profit, although C brings in no capital.

17. Resolution:

A partnership can be dissolved at any time. This can be done voluntarily if all partners agree. Events such as the death or insolvency of a partner can also lead to the dissolution of the partnership. A partnership can also be dissolved by a court.

18. Taxation:

The Income Tax Act 1961 contains separate provisions for the calculation of tax on income received by the company. It distinguishes the income of the company from the income of the shareholders.

On the subject of matching items

Organisation,to form,partnership

Functions of a manager: planning, organizing, leading and controlling

Factors influencing the choice of distribution channel


What are the characteristics of partnership company? ›

The following are the five characteristics of a partnership:
  • Sharing of profits and losses.
  • Mutual agency.
  • Unlimited liability.
  • Lawful business.
  • Contractual relationship.

What are the seven 7 characteristic elements of partnership? ›

Seven Characteristics of a Great Partnership
  • Trust. Without trust there can be no productive conflict, commitment, or accountability.
  • Common values. ...
  • Chemistry. ...
  • Defined expectations. ...
  • Mutual respect. ...
  • Synergy. ...
  • Great two-way communications.

What is partnership characteristics and types? ›

A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits. There are several types of partnership arrangements. In particular, in a partnership business, all partners share liabilities and profits equally, while in others, partners may have limited liability.

What are the 8 characteristics of a partnership? ›

Characteristics of a Partnership
  • A partnership is an unincorporated association of two or more individuals to carry on a business for profit. ...
  • Ease of formation. ...
  • Transfer of ownership. ...
  • Management structure and operations. ...
  • Relative Lack of regulation. ...
  • Number of partners.

What are the 7 partnership principles? ›

Seven Partnership Principles

The partnership principles of equality, choice, voice, reflection, dialogue, praxis, and reciprocity provide a conceptual language that coaches can use to describe how they strive to work with teachers.

What are the most important things in a partnership? ›

One of the most important aspects of a good business partnership is shared short-term and long-term values. This doesn't mean you have to agree on everything but too many disagreements can hurt the business over the long term. In many ways, a business partnership is similar to a marriage.

What are the characteristics of good partnership working? ›

The key principles of partnership working are, openness, trust and honesty, agreed shared goals and values and regular communication between partners.

What are the 5 principles of partnership? ›

These are:
  • Trust,
  • Shared knowledge,
  • Innovation,
  • Agreed Goals,
  • Balance of return.

What are the 6 principles of partnership? ›

Everyone needs to be heard. Everyone has strengths. Judgments can wait. Partners share power.

Which two sentences describe characteristics of a partnership? ›

Which two sentences describe characteristics of a partnership? The owners are free from personal liability. The owners pool their resources to raise capital.

Is a very important characteristics in a partnership? ›

The very bases of the partnership business are good faith and mutual trust. Every partner should act honestly and give proper accounts to other partners. The partnership cannot run if there is suspicion among partners. It is very important that partners should act as trustees and for the common good of all.

What are main characteristics of company? ›

Characteristics of a Company: 6 Features. A company is a voluntary association of persons, recognised by law, having a distinctive name, a common seal, formed to carry on business for profit, with capital divisible into transferable shares, limited liability, a corporate body and perpetual succession.

What is the most important characteristic of a company? ›

One of the best characteristics a successful business can have is knowing their customers and providing what they are looking for. Being able to understand your customers' needs should be at the centre of every successful business, whether you sell directly to your customers, or to other businesses.

What are three characteristics of partnership? ›

We return to the definition of a partnership: “the association of two or more persons to carry on as co-owners a business for profit[.]” The three elements are (1) the association of persons, (2) as co-owners, (3) for profit.

What are the 4 types of partnership? ›

There are four types of business partnerships:
  • LLC partnership (also known as a multi-member LLC)
  • Limited liability partnership (LLP)
  • Limited partnership (LP)
  • General partnership (GP)
Sep 18, 2019

What are 5 things that should be included in a partnership agreement? ›

Most good partnership agreements contain the following clauses:
  • The name of the partnership.
  • The partnership's goals.
  • How the partnership will operate, such as an LLC or a corporation.
  • The partners' names and addresses.
  • How partners participate in decision-making, such as how to decide whether to hire employees.
May 2, 2022

What are the four ways to build a successful partnership? ›

4 Ways to Build a Successful Partnership
  • Set clear expectations. ...
  • Consider your partner a part of your team. ...
  • Give back. ...
  • Make honesty and transparency the basis of everything you do.
Feb 5, 2020

What are the basic elements of partnership? ›

To determine whether a partnership exists courts look at: (1) intention of the parties, (2) sharing of profits and losses (3) joint administration and control of business operation, (4) capital investment by each partner, and (5) common ownership of property.

What are the 3 C's to develop successful partnership? ›

A successful partnership requires three key elements: comprehension, collaboration, and communication.

What is the main purpose of a partnership? ›

The purpose of partnership agreement (or partnership contract) is to establish a business enterprise through a legally binding contract between two or more individuals or other legal entities. This partnership agreement designates the rights and responsibilities of each partner or entity involved.

How do you build a strong partnership? ›

How to Build a Strong Partnership
  1. Trust. The foundation of any good relationship is trust. ...
  2. Common values. Some people may argue with me, but I believe that having common values is the very foundation for the successful partnership. ...
  3. Chemistry. ...
  4. Defined Expectations. ...
  5. Mutual respect. ...
  6. Synergy. ...
  7. Great two-way communication.

How do you describe a business partnership? ›

A partnership business, by definition, consists of two or more people who combine their resources to form a business and agree to share risks, profits and losses. Common partnership business examples include law firms, physician groups, real estate investment firms and accounting groups.

What are three features of a partnership business? ›

The main features of a partnership
  • Profits and losses are shared equally between the partners;
  • Partners bear unlimited liability for debts and obligations incurred by the partnership. ...
  • Each partner is an agent for the other(s). ...
  • Partnerships are assumed to be infinite.
Sep 5, 2016

What is an example of a partnership company? ›

Common partnership business examples include law firms, physician groups, real estate investment firms and accounting groups. By comparison, a sole proprietorship puts all of those responsibilities on one person, while a corporation operates as its own legal entity, separate from the individuals who own it.

What is the most important element of partnership? ›

Ans: One of the most important elements of a partnership is a contract/agreement for partnership. There has to be a voluntary and contractual agreement between partners.

What is important in business partnership? ›

When starting a business, the secret to the success of every partnership agreement is rooted in trust and respect between the two partners. You must be able to trust the decision making, temperament, vision, and competence of your partner and vice versa. Make sure to respect one another's abilities and personalities.

What is a partnership short answer? ›

A partnership is a form of business where two or more people share ownership, as well as the responsibility for managing the company and the income or losses the business generates.

How does a partnership company work? ›

In a partnership, you and your partner (or partners) personally share responsibility for your business. This includes: any losses your business makes. bills for things you buy for your business, like stock or equipment.

What is the structure of a partnership company? ›

A partnership is a single business where two or more people share ownership. Each partner contributes to all aspects of the business, including money, property, labor or skill. In return, each partner shares in the profits and losses of the business.


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