Meaning: - Partnership firm is a voluntary association of two or more who contribute their capital and services, and share the profits and losses in an agreed proportion.
Definition: - “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.” (Section 4 of the Indian Partnership Act, 1932.)
Following is the features of Partnership firm
1. Joint ownership
2. Agreement
3. Lawful business
4. Unlimited liability
5. Business secrecy
6. Sharing of profit and losses
7. Number of partners
The above Import features are briefly explained as under
1. Joint Ownership: The partnership firm is jointly owned by the partners. The partners have to use the partnership property only for business purpose and not for personal purpose.
2. Agreement: - Partnership is an outcome of an agreement between two or more persons to conduct a business with a view to earn profit. The agreement may be oral or written. It is always advisable to have written agreement.
3. Lawful business: - The partnership firm must undertake only that business is which permitted by law. They must conduct lawful business only and they cannot undertake unlawful business .for ex, sale of illegal arms. Or indulge in smuggling business.
4. Unlimited Liability: -The liability of each partner is joint several and unlimited as per the Indian partnership Act 1932. all the partners is jointly liable along with other partner for the debt of the firm
5. Business Secrecy: -unlike sole trading concern, a partnership firm lacks complete business secrecy. This is because there are several partners and some partners may leak out the business information to outsiders.
6. Sharing of Profit and Losses: - The partners agree to share the profits among themselves in a certain proportion. The agreed proportion depends upon the amounts of capital contributed.
7. Number of Partners: - A partnership must have a Minimum of two Persons. The maximum persons in the case of banking business is Ten and in the case of ordinary partnership (other than banking business), the Maximum number of partner is Twenty.