The partnership is the most common form of business structure. In this, a minimum of two persons combine their investments, abilities, experiences, and other things to start a business. The maximum number of partnership varies in every country. A partnership is different from sole proprietorship but also the same to some extent.
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 is a few of the most important benefits of the partnership. Although, we can not neglect the 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 a number of other things.
Keeping them in writing is best practice, that piece of paper is circulated among partners and also shown to the registration authority in your country. If you are going to write it, you must consider the most important contents of the 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
4. Profit Motive
The basic motive of the formation of partnership is to earn a profit. The more sales you generate the more profit you make. Its partner’s duty to distribute it according to the 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
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 a
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 the principal to another partner. He can bind the other person by his act. In the position of an agent, he can make a 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 a
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.
If, Limited Partnership
A limited partnership is that form of organization in which the liability of some persons is limited, to the amount of capital which they have contributed to the business and certain persons are liable for all the obligations of the firm. The main characteristics of a limited partnership are as under:
Limited Partner: There must be at least one limited partner.
General Partner: There must be one or more persons with unlimited liability who are liable for all debts of the firm, they are called general partners.
The number of members: There are at least two members but not more than twenty ordinary business and not more than ten in the banking business.
Restriction for participation: Limited partners are not allowed to participate in the management of the business. So one partner cannot bind other persons by his act.
Inspections of books: Limited partners may inspect, verify and copy all types of accounts, record and books at any time.
Compulsory Registration: The registration is compulsory by law. With the registration of the firm, the rights and liability of partners have also been registered.
Admission of a New Partner: New partners may be admitted in this kind of partnership without the consent of the limited partner.
Separate Legislation: It is controlled under the limited partnership act 1907.
Withdrawal of Capital: Limited partner cannot withdraw his capital from the business until he remained a limited partner.
Transferability of share: The share of the limited partner can be transferred to another partner with the consent of all general partners.
Conditional participation in management: If a limited partner conducts the management of a business, he will be liable for all the obligations of the firm.
Proposals and advice: Limited partner is entitled to give his proposals and advice to active partners.
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