What Is The Meaning Of Partnership?The limitationsofsole proprietorshipform of organistation led to theformation ofanother form of organization known aspartnership.Definition:-In India,partnershiporganization is formed and managed by IndianPartnershipAct, 1932.Section 4 ofPartnershipAct definespartnershipas the relation between persons who have agreed to share profits of a business carried on by all or any of them acting for all.Minimum Requirement:-Minimum of 2 persons are required toform a partnershipand maximum of 10 personsin case ofbanking and 20in case ofothers.Features:-1. The relation of partners is based on the contract.2. At least 2 persons are required for theformation ofpartnershipfirm.3. There must be some undertaking of business.4. The objective must be to earn profits and share among partners.5. Law of agency applies.6. Partners liability is unlimited.7. Mutual trust and confidence is the basis ofpartnership.8. Every partner can be a principal or agent of other partners during thecourse of business.9. Consensus i.e. mutual consent is required for all important decisions.10. Restriction on transfer of share.11. No relation between contribution of capital and share of profits.12. Life span ofpartnershipdepends upon the will of partners.Benefits ofPartnership:-1. Formation ofpartnershipis easy as it does not involve too many legal formalities.2. Flexibility in the operations of the business.3. Registration ofpartnershipform of organisation is not compulsory as in the case of company.4. All major decisions are taken by mutual trust, which results in better decision making.5. Sharing of risk helps information ofcapital.6. Relation of effort and reward.7. Unlimited liability helps in more credit worthiness.8. It protects the interest of minority as mutual consent i.e. consensus is required to take all the major decisions.9. Easy to maintain secrecy aspartnershipfirm is not under an obligation to disclose its annual accounts.10. No legal formalities for dissolution.Limitations:-1. Unlimited liability increases the risk; this hinders thegrowth of business.2. Limited resources for generating capital.3. No perpetual succession i.e. sudden death or retirement of any one of the partners dissolves thepartnership.4. Lack of good faith and confidence among partners causes greatlimitations.5. No transfer of shares.6. Burden of law of agency.7. Due to non-disclosure of accounts there is always a lack of public confidenceSuitability:-1. For service industry:- Accounting, Medical, Legal, Transportation, Warehousing etc.2. Medium enterprises.3. For distribution.Types ofPartnership:-1. GeneralPartnership:-In this type ofpartnership, partners are with unlimited liabilities. It can be further divided into two types: (a)Partnershipat Will:-Mutual trust, faith and confidence among partners are the key for the existence of this type ofpartnership.(b)ParticularPartnership:-It is formed for a fixed duration or for specific tasks and it dissolves automatically as soon as the fixed time lapses or the specific task is achieved.2.LimitedPartnership:-This type ofpartnershiphas been introduced in US, England and in otherEuropean countries. All the partners in this type ofpartnershiphavelimited liabilityexcept one partner.Category:Business,Business & Finance,Business Law