Features of partnership firms

FEATURES OF PARTNERSHIP FIRMS

1)Agreement

Partnership is an outcome of an agreement between two or more persons to conduct the business with the view to earn profit. The agreement may be oral or written, but it is always advisable to have written agreement.

2)joint ownership

The partnership is jointly owned by all partners. This means, partners have to use the partnership property only for business purpose and not for personal use.

3)joint management

Every partner has the right to take active part in the management of business. However, one or more partners may agree to manage the business on behalf of others. Such partners are generally appointed as active partners.

4)lowful business

The partnership firm must undertake only that business which is permitted by law. It means the partnership firm cannot involve any illegal business like smuggling.

5)liability

The liability of each person is unlimited and is joint as well as several. Unlimited liability means if business property is not sufficient to pay the debts then personal property of the partners will be used.

   Joint and several liability indicates that each partner is jointly as well as separately liable for the firm.

6)Mutual trust and confidence

In partnership business there must be mutual trust and confidence among the partners in one another. It is important on the part of the partners to disclose all the information which directly relates to the business.

7)Number of partners

The partnership firm must have minimum 2 members and maximum 10 members in banking business and 20 members is non-banking business.

8)principal-agent relationship

Every partner is the joint owner of the therefore he takes part in the management of the firm. Thus, he plays a double role of a 'principal ' and that of an 'agent'.

9)sharing of profit and losses

 The sharing of profit and losses depend upon the amount of capital contributed, the services offered and goodwill of the partner. If the partnership deed is silent regarding the sharing of profit and losses, then it is to be shared equally.

10) Dissolution

The partnership can be dissolved at any time either voluntary or compulsory by law. Partnership automatically gets dissolved due to death, insolvency, insanity of any one of the  partners except one. It can also be dissolved by the court order for illegal business.