Partnership Firm

The owners of a partnership business are individually known as the “partners” and collectively as a “firm”. A partnership is formed by an agreement, which may be either written or oral. When the written agreement is duly stamped and registered, it is known as “Partnership Deed”. Ordinarily, the rights, duties and liabilities of partners are laid down in the deed. But in the case where the deed does not specify the rights and obligations, the provisions of the THE INDIAN PARTNERSHIP ACT, 1932 will apply.

• The minimum number of partners must be two, while the maximum number can be 10 in case of banking business and 20 in all other types of business.
• The firm has no separate legal existence of its own i.e., the firm and the partners are one and the same in the eyes of law.
• Liability of the partners is unlimited. Legally, the partners are said to be jointly and severally liable for the liabilities of the firm.
• Restrictions are there on the transfer of interest i.e. none of the partners can transfer his interest in the firm to any person(except to the existing partners) without the unanimous consent of all other partners.
• The firm has a limited span of life i.e. legally, the firm must be dissolved on the retirement, lunacy, bankruptcy, or death of any partner.
• A partnership is easy to form as no cumbersome legal formalities are involved. Its registration is also not essential. However, if the firm is not registered, it will be deprived of certain legal benefits. The Registrar of Firms is responsible for registering partnership firms.

Advantages of Partnership firm 

• Ease of formation
• Greater capital and credit resources
• Better judgement and more managerial abilities

Disadvantages of Partnership firm

• Absence of ultimate authority
• Liability for the actions of other partners
• Limited life
• Unlimited liability