Features of Partnership:
The main features of Partnership are:
1. Contractual Relationship:
The partnership arises only from a contract between a certain number of persons called partners. An oral contract is sufficient but it is always better to draft a deed of partnership. This is the First features of partnership.
2. Two or More Persons:
In a partnership, there must be at least two persons. According to partnership Act, there is no maximum limit of partners, but according to Companies Act 1956, the maximum number of partners is 10 in case of banking business and 20 in case of other business operations.
3. Existence of Business:
Where there is no business, there is no partnership. By business is meant all activities concerning production and distribution of goods and services for the purpose of earning profits.
4. Sharing of Profits:
The agreement to carry on business must be with the objective of making a profit and sharing it among all partners. If the partnership is formed to do some charitable work, it will not be called a partnership.
5. The extent of Liability:
The liability of each partner for the firm is unlimited. If the assets of the firm are not sufficient to satisfy the claims of the creditors of the firm, the private assets of the partners can also be attached to meet such claims.
6. Mutual Agency:
The business may be carried on by all partners or one or more actions on behalf of other partners. In other words, a partner is both an agent and a principal. Agent for other partners and principal for himself.
7. Transfer of Interest:
No partner can sell or transfer his share to anybody else so as to make him a partner in the business. This can, however, be done with the consent of all the partners.
8. Utmost Good Faith:
All the partners must have the utmost good faith in each other. Every partner should act honestly and in the best interest of the firm. Distrust and suspicion among partners lead to the failure of many partnership firms.
9. No Separate Entity:
A partnership firm has no separate existence from its members. Partner and the partnership firm are taken as the same. A partnership is not an artificial person in the eye of law.
10. Capital Contribution:
The partners may not contribute capital to the firm proportionately. A partner may even be admitted to the partnership without any capital contribution.
11. Individual as Partner:
In a partnership business, only individual a physical person can become a partner, not an institution.
The partnership may be dissolved on the death, lunacy or insolvency of any of the partners. However, the firm may continue if the remaining partners desire so after settling the claim of the outgoing partner.