A partnership is an organization of course of action where parties, known as colleagues, consent to coordinate to propel their common advantages. The accomplices in an association might be people, organizations, intrigue based associations, schools, governments or blends.
- Formation: A partnership firm is not a separate legal entity. In any case, as indicated by the demonstration, a firm should be shaped by means of a legitimate understanding between every one of the accomplices.
- Liability: All partners have unlimited liability in the business. The partners are all individually and jointly liable for the firm and the payment of all debts.
- Risk Bearing: The risk in the business is borne by the partners. The profit and loss they earn for the risk taken are shared by the partners depending upon their contribution to the capital. … Mutual Agency: In partners, each person is the principal and the agent.
- Decision Making and Control: The process of decision making involves all partners in the business. The consensus process is to a comprehensive approach to decision making, focusing on finding common ground among partners and eventual reaching a collective decision
- Continuity: A partnership cannot carry out in perpetuity. The death or retirement or bankruptcy or insolvency will dissolve the partnership. The rest of the accomplices may proceed with the organization in the event that they so pick, yet another agreement must be drawn up.
- Membership: The new Companies Act 2013 has prescribed the maximum number of members. In the case of a partnership, the firm should not be more than 100 in case of partnerships. According to the past Companies Act 1956, the most extreme farthest point in the event of associations was 10 and 20 for banking business and different organizations separately.
- Mutual Agency: In an organization, the business must be completed by every one of the accomplices together. Or alternatively, it can be carried out by any of the partners. The acting for all of them or on behalf of all of them.
Merits of partnership
- Ease of formation and closure: A partnership firm can be set up easily and quickly. Therefore there are many, not legal formalities and expenditures involved in the establishment of a partnership. Similarly, a partnership firm can close down very easily and quickly.
- Balanced decision making: Moreover, several people are involved in making a decision, there is less margin for error as each person can check the other’s recklessness.
- More Funds: A firm consists of more than one person. Hence it can verify increasingly capital from joined assets.
- Sharing of Risks: Partnership every partner bears the risk individually. So it is easier compared to a sole proprietorship.
- Secrecy: In the association, there is no legitimate commitment to accomplices to distribute its monetary data, so the accomplices expect to keep the data mystery.
Limitation of partnership
- Unlimited liability: The proprietor is liable for all the debts of the business. In case the assets are insufficient to meet the debts, the personal property of the proprietor can be attached.
- Limited resources: There is a low investment. May be higher than in sole trading but not sufficient for large scale production resulting in limited areas of operation.
- Possibility of conflicts: Among the partners is essential for the success of the partnership. At the point when the quantity of accomplice builds, contrasts of assessment and debates will in general emerge and upsets the smooth working of the business.
- Lack of continuity: Likewise, Partnership to an end with the death, the retirement of a partner. So, it may result in a lack of continuity.
- Lack of public confidence: A partnership firm lacks the confidence of the public because it is not subject to detailed rules and regulations. Moreover, Lack of publicity of its affairs undermines public confidence in the firm.