Partnership is an association of two or more persons who have mutually decided to carry out business activities jointly and share its profits as well as losses. The partnership agreement may be written or oral.
Features of Partnership firm –
1. Agreement: The partnership arises out of an agreement between two or more persons.
2. Profit sharing: There should be an agreement among the partners to share the profits of the business.
3. Lawful business: The business to be carried on by a partnership must always be lawful.
4. Membership: There must be at least two persons to form a partnership. The maximum number is 20. But in case of banking business the maximum is 10 members.
5. Unlimited liability: The liability of every partner is unlimited, joint and several.
6. Principal-agent relationship: Every partner is an agent of the firm. He can act on behalf of the firm. He is responsible for his own acts and also for the acts done on behalf of the other partners.
7. Collective management: The firm and the partners are one. When a contract is made in the name of the firm all the partners are responsible for it individually and collectively.
8. Non-transferability of shares: A partner cannot transfer his share of interest to others without the consent of the other partners.