Partnership firm is a type of business organization which is established and operated by two or more than two individuals. Some of the key features or characteristics of of partnership firm are agreement among partners, unlimited liability, joint ownership, good faith, sharing of profit etc.
Partnership is an association of two or more persons. It is formed to do lawful business. Partners should be competent to enter into a contract.
Partnership is based on written agreement among partners. It is called partnership deed. It is a legal contract and guides the business activities of partnership firm. It helps to settle disputes among partners.
Partners have unlimited liability. Every partner is jointly and personally responsible for business debts. The personal property of partners can be used to pay business debts.
Partnership firm is jointly owned and controlled by partners. Every partner has the right to take part in management of business.
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Partners share profit and loss as per agreement. There can be no partnership without sharing profit and loss. If a share of profit is given to employees, it is not partnership.
Partners and partnership are one and the same. Partnership has no separate legal identity. Partners are responsible for all business activities of the partnership.
The share of a partner is not freely transferable. It requires the consent of all the partners. Any one partner cannot transfer his share in partnership at his own free will.
Partnership is based on good faith. There must be mutual trust and understanding among partners. There should be no secrecy about business matters among partners.
Uncertainty is another characteristic of partnership firm because it has uncertain life. The partnership agreement decides its life. It comes to an end when a partner retires, dies or become insolvent.
Main characteristics of partnership firm can be described as follows:
1. Association
Partnership is an association of two or more persons. It is formed to do lawful business. Partners should be competent to enter into a contract.
2. Agreement
Partnership is based on written agreement among partners. It is called partnership deed. It is a legal contract and guides the business activities of partnership firm. It helps to settle disputes among partners.
3. Unlimited liability
Partners have unlimited liability. Every partner is jointly and personally responsible for business debts. The personal property of partners can be used to pay business debts.
4. Joint ownership and control
Partnership firm is jointly owned and controlled by partners. Every partner has the right to take part in management of business.
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5. Sharing of profit and loss
Partners share profit and loss as per agreement. There can be no partnership without sharing profit and loss. If a share of profit is given to employees, it is not partnership.
6. No separate identity
Partners and partnership are one and the same. Partnership has no separate legal identity. Partners are responsible for all business activities of the partnership.
7. Restriction on share transfer
The share of a partner is not freely transferable. It requires the consent of all the partners. Any one partner cannot transfer his share in partnership at his own free will.
8. Good faith
Partnership is based on good faith. There must be mutual trust and understanding among partners. There should be no secrecy about business matters among partners.
9. Uncertain life
Uncertainty is another characteristic of partnership firm because it has uncertain life. The partnership agreement decides its life. It comes to an end when a partner retires, dies or become insolvent.