Question

Write short answer of the following.
Define partnership and state its important features.

Answer 1

Partnership is a form of organisation wherein two or more persons work together, pool funds and share the profits earned (or bear the losses incurred). The following are some of the important features of partnership:
i. Easy formation: A partnership firm requires an agreement (oral or written) among its members to share the profits and losses as per the specified ratio.
ii. Unlimited liability: All the partners have unlimited liability. In other words, if the business assets fail to meet all the business debts, personal properties of the partners can be utilised for the purpose.
iii. Risk bearing: The risk associated with the fluctuations in the firm’s profits is borne jointly by the partners. This reduces the burden on each partner.
iv. Sharing of decision making and control: In a partnership firm, the decision making and control are shared by the partners.
v. Number of members: In a partnership business, the minimum number of members is 2 and the maximum number of members is 20. However, for a banking business, the maximum number of members is 10.
vi. Continuity: According to the Partnership Act, the death, lunacy, insolvency or insanity of any of the partners ends the partnership.