Definition of Partnership

Indian Partnership Act was enacted in 1932. A partnership firm is an organization which is formed with two or more persons to runs the Firm with a view of earning profit. Each member of such a group is known as the partner to the Firm and the firm is collectively known as the partnership firm.

Section 4 of the Indian Partnership Act 1932 Defines A partnership is a relation between two or more person who has agreed to share the profit or losses incurred by the business carried on by them or any of them acting for all. 

Essential of partnership under section 4 of the Indian Partnership Act 1932

• There shall be an agreement between the parties who want to be the partner and has agreed to share the profit and losses incurred by the business.
• The purpose or the reason for creating a partnership should be for carrying business.
• The Purpose for the creation of a partnership should be earning and sharing profits.
• The business should be carried on by all the partners either by all of them or any of them acting for all i.e. mutual agencies. when all the above elements are present in a certain relationship are known as partnership. The person who has entered into a partnership with one another are called individual partners and collectively are known as Partnership Firms. Characteristics of a Partnership Firm: 
• The Number of Partners: Minimum number of partner required to start a partnership firm is two and maximum limit is 10 in case of banking business and 20 is Maximum limit in case of all other types of business or Firms.
• Contractual relationship: A written agreement between the parties is called a partnership deed. which is signed and consented by all the Partners. The deed binds them all in a contractual relationship.
• Competence of Partners: The Partners entering into partnership agreement or deed must be competent to enter into such an agreement. The partner shouldn’t be minor (in some cases minor can be admitted as a partner only to the benefits of the partnership), lunatic or insolvent
• Voluntary Registration: The registration for a partnership firm is not compulsory. But once the firm is registered it provides a lot of benefit to the partners.
• Sharing of Profit and Loss: In a partnership firm, all Partners of the Firm must share an equal amount of profits and losses incurred by the firm.
• Unlimited Liability: The liability of the partners in the partnership firm is unlimited. They are jointly held liable for any debts and losses incurred by the firm.
• Transfer of Interest: No partner can transfer his or her interest in the firm to anybody without the mutual consent of other Partners of the firms.
• Principal-Agent Relationship: This relationship is based on mutual trust and faith among the competent partners for the interest of the firm. The business of the firm may be carried on by all the partners or any one of them acting for all