Partnership

PARTNERSHIP Section 4 of Indian partnership Act 1932, defines partnership in the following terms

Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all persons who have entered into partnership with one another are called individually ¶partners· and collectively ¶a firm·.

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 The following essential characteristics stand out :

1. 

Asso Associ cia ation tion of two two or or mor more e per perso son ns.

 There should be at least two competent com petent persons to form a partnership.

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As regards the maximum number of  partners in a firm, Sec. 11 of the Companies Act, 1956 provides that the number of  partners in a firm carrying on banking business should not exceed  ten ten and in any  other busine business twen twenty. 2 . Agreement.   The partnership relation is one of  contractual nature. Agreemen reement between the partners is the basis of  this this contra tract. express (i.e., oral or   The agreement may be express written )or impli mplied.  xed peri per iod, or   The agreement may be for a f i xed it may give option to the partners to withdra thdraw f rom the pa partn rtners ership at any any time.

Partnership is thus created by contract ; it does not arise by operation of  law. 3 . Business. A partnership can be formed only for the t he purpose of carrying on some business. ¶Business·  includes every trade, occupation and profession. 4 . Sharing of profits.  The object of partnership must be to make profit. Profit must be distributed among the partners in an agreed ratio. 5. Mutual ag agency. L aw of  partnership -an extension of  the law of  agency A partner assumes a two-fold character : 1. He is an agent of the firm so far his dealings with the outside world for the purposes of the business of  the firm are concerned. 2. He is a principal so far as the other partners are concerned. 

may be partners ? A contract of partnership may  be every into by every person who is competent to enter into a contract (Sec. 1 of the Indian Contract, 1872).

Who

  Alien enemy . An alien enemy cannot enter into a contract of partnership with an Indian subject. An alien friend can do so. 

Person of  unsound

mind is not competent to enter into a contract of partnership.

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orporation. C orporation.

A corporation, i.e., a registered company, can enter into a contract of partnership as a single individual but not as a group g roup of individuals comprising it.