Features of Partnership
1. Existence of business:
The objective of partnership must be to do some type of business. Business here means any activity leading to earn profit persons joining together and agreed to do charitable work or for formation of any club for entertainment would not be treated as partnership due to absence of the business.
Even agreement of taking up any business activity in future shall not be treated as partnership fill the formation of business.
2. Numbers of persons:
There must be at least two or more persons to form a partnership firm. As per Indian partnership Act, the minimum number of person required is to buy it does not prescribe the maximum limit for the purpose.
3. Contractual relationship:
There should be a contractual relationship between the persons forming partnership. Persons competent to contract can be partners.
They have to mutually agree and jointly decide to go for any business activity as per agreed terms and conditions. This may be either written or oral form among the partners.
4. Sharing of Profits:
Business is carried on to share profit and not to incur losses. The profits generated by the firm are to bestaned among the partners on an agreeable proportion. Loss it any has also to be borne by them on that ratio.
Partnership contract is based on principle of agency. Each partner is an agent of other partners. The business is carried on by all or any one of them acting on behalf of all other partners.
6. Utmost good faith:
The partners should have utmost good faith in each other. They should be just and honest. They should present true accounts and must disclose true information to one another.
7. Unlimited liability:
Like sole proprietorship, every partner has an unlimited liability in respect of debts of the firm. If the property or the assets of the firm are insufficient to meet the claims of the creditors, the private property of the partners can be attached to meet the claims of the creditors.
8. Restriction on transfer of ownership:
A partner cannot transfer his share in business to an outsider without the consent of all other partners. This is because the partnership agreement is based on contract among individuals.
9. Capital contribution:
Each partner contributes his share in the capital of the partnership firm. The capital contribution need not be equal or in any particular proportion. It must be as per the agreement each partner is behind to contribute that amount. A partner may be admitted to partnership without any capital contribution.
10. Duration of the partnership:
The existence of the partnership firm continues at the pleasure of the partners. Legally of partnership comes to an end, if any partner dies or becomes insolvent or retries.
The remaining partners may agree to continue the business under the original firm’s name after settling the claims of the outgoing partner.