Partnership Firm

A partnership can be defined as a relation between two or more persons who have agreed to share the profits of a business carried on by all of them or any of them acting for all. Main features of this form are:

  • Easy to form (no elaborate legal activities). Registration not essential.
     
  • Minimum partners – 2, Maximum partners – 10 (in banking), 20 for all other businesses.
     
  • No separation of legal existence.
     
  • Ownership of property carries right of management for each partner
     
  • Liability of partners is unlimited
     
  • Restrictions on the transfer of interest
     
  • Limited span of life (must be dissolved if one partner is unable to continue).
     
  • Difficult to raise a large amount of capital
     
  • Governed by Indian Partnership Act, 1932

Advantages

Disadvantages

Ease of formation

Absence of ultimate authority

Greater capital and credit resources

Liability for actions of other partners

Better judgement and more managerial activities

Limited life

 

Unlimited liability


Suitable for: Medium size businesses, involving limited capital.