Definition of partnership
The relation between persons who have
agreed to share the profits of a business carried on by all or any one of them
acting for all.
Salient features
The salient features of
partnership are as under
1.
Formation: there
must be at least two persons and maximum twenty to form a partnership and all
such persons must be competent to contract. In case of banking business the
memberships should not be more than ten persons.
2.
Financing:
The capital is made available to the firm by the partners as per terms of the
agreement. It is not necessary that all the partners should contribute equally
to the partnership. A person who has special skill or ability can be admitted
to the partnership without any capital contribution.
3.
Management: In
a partnership business, every partner has a right to take part in the
management. The important business decisions are taken with the consent of all
other partners.
4.
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.
5.
Unlimited liability of partners: The liability of the partners of a firm is unlimited.
If the business suffers losses and the assets of the partnership are not
sufficient to meet its obligations, then the creditors may choose to sue any
one or all of the partners to repay the debt. This poses a serious handicap for
the individual partners with large personal assets.
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