Partnership
Partnership is the relation between persons who have agreed to share profits of the business carried on by all or any of them acting for all.
Partnership is constituted by an agreement between the partners. The agreement may be in writing or oral which determines the constitution, rights and profit sharing of all the partners.
Key Attributes
| Duration | Not specified in the Act, as decided between the partners. |
|---|---|
| Profit and loss | All the profits and losses are shared by all the partners, unless otherwise decided. |
| Liability | Unlimited personal liability |
| Capital | Contribution by all the partners |
| Restriction on Transfer of Interest | No partner can transfer his share to any other person without the prior consent or willingness of all other partners. |
| Registration | Not mandatory. But its beneficial to get registered. |
| Continuity of Business | A partnership firm comes to an end in the event of death, lunacy or bankruptcy of any partner. Even otherwise, it can discontinue its business at the will of the partners. At any time, they may take a decision to end their relationship |
| No Separate Legal Existence | Just like sole proprietorship, partnership firm also has no separate legal existence from that of it owners. Partnership firm is just a name for the business as a whole. The firm means the partners and the partners collectively mean the firm. |
| No Separate Legal Existence | All the partners of the firm are the joint owners of the business. They all have an equal right to actively participate in its management. |
Advantages of a partnership:
- start up cost is low
- qualified people can be made partners
- more funding options are available
- more business opportunities are available
- easy to change your legal structure
- limited legal regulations
Disadvantages of a partnership:
- personal unlimited liability of partners
- Potential for differences and conflict
- Slower and difficult decision making
- Profits are shared between partners
