The Indian Partnership Act, 1932, Section 4, defined partnership as “the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”
According to J. L. Hanson, “a partnership is a form of business organization in which two or more persons up to a maximum of twenty join together to undertake some form of business activity”. Now, we can define partnership as an association of two or more persons who have agreed to share the profits of a business that they run together. This business may be carried on by all or any one of them acting for all.
Here in this article let us understand what is partnership firm registration and its features.
What is a Partnership Firm and it’s Features?
In India, we have a definite law that covers all aspects and functioning of a partnership, The Indian Partnership Act 1932. The act also defines a partnership as “the relation between two or more persons who have agreed to share the profits from a business carried on by either all of them or any of them on behalf of/acting for all”
So in such a case two or more (maximum numbers will differ according to the business being carried) persons come together as a unit to achieve some common objective. And the profits earned in pursuit of this objective will be shared amongst themselves.
The entity is collectively called a “Partnership Firm” and all the individual members are the “Partners”. So let us look at some important features
Features of Partnership firm
- Profit and Loss Sharing
There is an agreement among the partners to share the profits earned and losses incurred in partnership business.
- Unlimited Liability
In a unique feature, all partners have unlimited liability in the business. The partners are all individually and jointly liable for the firm and the payment of all debts. This means that even the personal assets of a partner can be liquidated to meet the debts of the firm.
A partnership cannot carry out in perpetuity. The death or retirement or bankruptcy or insolvency or insanity of a partner will dissolve the partnership. The remaining partners may continue the partnership if they so choose, but a new contract must be drawn up. Also, the partnership of a father cannot be inherited by his son. If all the other partners agree, he can be added as a new partner.
- Number of Members
As we know that there should be a minimum of two members for a partnership. However, the maximum number will vary according to a few conditions. The Partnership Act itself is silent on this issue, but the Companies Act, 2013 provides clarity.
- Existence of Lawful Business
The partnership is formed to carry on some lawful business and share its profits or losses. If the purpose is to carry some charitable works, for example, it is not regarded as a partnership.
Here in this article, we have understood what is partnership firm and its features, it will surely be useful for you to grow your business. If you wish to for Partnership firm registration then you should visit the Online Partnership firm registration.
Before going ahead with the registration process, a business has to check company name availability to ensure that the proposed name selected does not contain any word as prohibited under the Companies Act, 2013. You can conduct a company name check here.