Partnership

In India, partnership organization is formed and managed by Indian Partnership Act, 1932. Section 4 of Partnership Act defines partnership as 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 of 2 persons are required to form a partnership and maximum of 10 persons in case of banking and 20 in case of others.

Features

• The relation of partners is based on the contract
• At least 2 persons are required for the formation of partnership firm
• There must be some undertaking of business
• The objective must be to earn profits and share among partners
• Law of agency applies
• Partner's liability is unlimited
• Mutual trust and confidence is the basis of partnership
• Every partner can be a principal or agent of other partners during the

Benefits

• Formation of partnership is easy as it does not involve too many legal formalities
• Flexibility in the operations of the business
• Registration of partnership form of organization is not compulsory as in the case of company
• All major decisions are taken by mutual trust, which results in better decision making
• Sharing of risk helps in formation of capital
• Relation of effort and reward
• Unlimited liability helps in more credit worthiness
• It protects the interest of minority as mutual consent i.e. consensus is required to take all the major decisions
• Easy to maintain secrecy as partnership firm is not under an obligation to disclose its annual accounts
• No legal formalities for dissolution

Suitability

• For service industry:Accounting, Medical, Legal, Transportation, Warehousing etc.
• Medium enterprises
• For distribution of profits