Question

Answer the following question:

State the features of Partnership firm

Answer 1

A partnership firm is an organization which is formed with two or more persons to run a business with a view to earning profit. Each member of such a group is known as a partner and collectively known as a partnership firm. These firms are governed by the Indian Partnership Act, 1932.
The features of a partnership firm are explained as follows :
(1) Agreement: A partnership is essentially an agreement between two or more persons to do some lawful business. The agreement may be written or oral.
(2) Sharing of profits: The agreement must refer to the sharing of the profits among the partners in some agreed proportion. If the agreement is silent on this point, the profits are to be shared equally.
(3) The number of partners: According to Section 11 of the Companies Act, 1956, a partnership firm must have a minimum of 2 persons as partners and a maximum of 10 persons as partners for banking business and 50 persons in the case of any other business.
(4) Joint ownership: The partnership firm is jointly owned by the partners. Therefore, the assets and the property must be used or utilized for conducting the business of the partnership. Such property cannot be used by any single partner for his personal gain.
(5) Unlimited liability: The liability of all the partners except minor partners is unlimited, joint and several. If business property is not sufficient, then the creditors can claim and recover their dues from the private property of the partners. They can recover entire dues from one partner or in proportion from all the partners or some of the partners.
(6) Dissolution: Events such as the death, insolvency or insanity of any partner affect the continuity and stability of the partnership firm unless specified otherwise. In the case of partnership at will, the partnership gets dissolved the moment any partner gives 14 days notice to that effect to other partners. A particular partnership or joint venture gets dissolved on completion of the specified period or objectives.
(7) Joint management: The management of partnership is collective. The business of a partnership may be managed by all of them or some of them or any one of them on behalf of others. All the partners have equal rights to manage the business. However, for convenience, some of the partners may voluntarily surrender their managerial rights in favour of managing partners.
(8) Principal-agent relationship: Every partner acts as the principal as well as the agent of the firm in the matters relating to its business. To the outsiders, every partner is the principal and to the other partners, he is an agent. As an agent, he can bind the firm as well as all other partners individually by his acts.