Characteristics of Partnership

Partnership is most common form of business structure. In this, minimum two persons combine their investments, abilities, experiences, and other things to start a business. The maximum number of partnership varies in every country. Partnership is different from sole proprietorship but also same to some extend.

Like Sole proprietorship, owners manage all business parts to grow and earn handsome profit. Adding different talent in the business, personal relations, experiences, and capital are few of the most important benefits of partnership. Although, we can not neglect disadvantages

Top 12 Characteristics of Partnership

If you are willing to start a business in partnership, you can do it oral or written. It means, you need to set some duties, roles, profit sharing decisions, management decisions and number of other things.

Keeping them in writing is best practice, that piece of paper is circulated among partners and also shown to registration authority in your country. If you are going to write it, you must consider most important contents of partnership deed.

1. Agreement

There must be an agreement between the parties concerned. This is the most important characteristics of a partnership. Without the agreement, the partnership cannot be formed. “No agreement no partnership.” But only competent persons are entitled to make a contract. There are some set conditions in a joint business deed.

These are determined clearly before the commencement of business. But it differs from business to business. This documents may be written or oral. But it must be written so that disputes may be settled according to the provisions of the agreement.

2. Number of Partners

There should be more than one person to form a partnership. Types of business partners can be any but there is a restriction for the maximum number of partners. In the case of ordinary business, the partners must not exceed 20 and in case of banking must not exceed 10 (before nationalization).

3. Business

The objective partnership formation is to carry on any type of business. It may be manufacturing or merchandise type small or large scale business but it should not be an illegal business in the country concerned.

4. Profit Motive

The basic motive of the formation of partnership is to earn profit. The more sales you generate the more profit you make. Its partners duty to distribute it according to agreed proportion. If there is loss it will be sustained by all partners except the minor.

5. Conduct of Business

The partnership business is conducted by all the partners or any or them acting for all. But each partner has rights to participate in the management by law.

6. Entity

It has no separate entity apart from its members. It is not independent of the partners. Law has not granted it any legal entity. Registration of Partnership Business to make it legal and gain more people trust.

7. Unlimited Liability

This is the prominent feature of partnership that the liability of each partner is not limited to the amount invested but his private property is also liable to pay the business obligations.

8. Investment

Each partner contributes his share in the capital according to the agreement. Some persons become partners without investing any capital in the business. But they devote their time, energy and ability to their business instead of capital and receive profit.

A combination of Monetary investment and time investment can develop strong business brand.

9. Transfer-ability of Share

There is a restriction to transfer the share from one partner to another person without the consent of existing partners. So, the investment in the partnership remains confined into few hands.

10. Position

One partner is an agent as well as principal to other partner. He can bind the other person by his act. In the position of an agent he can make valid contract with another person or parties on behalf of his concerned firm.

11. Mutual Confidence

The business of the partnership cannot be conducted successfully without the element of mutual confidence and cooperation of partners. So the members must have trust and confidence in each other. Lack of mutual confidence is drawback of partnership.

12. Free Operation

There are no strict rules and regulations to control the partnership activities in few countries i.e., no restriction for the audit of accounts, submission of various reports and other copies to any government authority. So this organization may operate freely without any interference.