Partnership is a form of business where two or more persons who have decided to share the profit of a business approved on by all or any one of them acting for all.
Feature of Partnership
Formation of partnership is very easy when two or more persons enter into agreement oral or verbal for entering into business then partnership is formed. To avoid confusion it is enviable that the article of partnership must be prepared in writing form. The article of partnership should cover the rights, duties, obligation and the arrangements which the parties have jointly agreed upon.
The capital is available to the firm by the partner because capital is like a blood for the firm. It is not necessary for the partner that equally contributes to the firm. A person who has particular expertise or ability can be own up to the partnerships without any capital contribution. The partnership compared to sole trader is in a better position to borrow funds from banks or other sources.
The management of the partnerships firm can be conducted by all the partners or by a few partners who are competent to handle the affairs of business.
If all the partners involved in the management of the firm, the control then rests with all of them. The major business decisions of what to produce where to produce, how much to produce, etc, taken in joint consultation. The control in short shared by all the partners in a firm.
The liability of all the partners in the partnership form of ownership unlimited. If the firm suffers losses, the creditors can sue any or all the partners as a group for the realization of the full debts of the firm. The partners, thus, are liable for the debts of the firm to the extent of their personal wealth.
The partnership is a temporary form of business ownership. It operates at the pleasure of the partners. The partnerships firm comes to an end if a partner leaves, dies, declared bankrupt or insane. It is also dissolved by the partners by obtaining a degree from the court.
In case a firm registered under the income tax Act, the profits of the firm divided among the partners. The tax charged on the incomes of the partners individually. In case the firm is not registered, then the firm will pay tax on its profits as a whole.
Partner as Agents
One of the most important features of partnership is that while carrying on business all the partners stand as agents and principals to one another. Thus every partner is in the eyes of law, the agent of the partnership and may bind the other partners by his act in all those matters that fall within the scope of the partnerships business.