Question

What is partnership firm? State its main characteristics.

Hint:

Mutual agency (one for all, all for one) is the essence of partnership.

Answer 1

Step 1: Definition.
As per the Indian Partnership Act, 1932: “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”
Step 2: Key characteristics.

Agreement: It is based on an agreement (oral or written).
Number of partners: Minimum 2, maximum 50 in India (as per Companies Act rules).
Profit-sharing: Partners share profits and losses in agreed ratio or equally if no agreement.
Mutual agency: Every partner is both an agent and principal; acts of one bind all.
Unlimited liability: Partners’ liability is unlimited and joint.
No separate legal entity: Firm is not separate from partners.
Registration: Registration is desirable but not compulsory.

Final Answer: \[ \boxed{\text{Partnership = business relation with profit-sharing + mutual agency + unlimited liability.}} \] % Quciktip