Partnership

Introduction of Partnership

A Partnership is a form of business organization where two or more persons agree to carry on a lawful business and share its profits and losses. In India, partnership is governed by the Indian Partnership Act, 1932. The relationship between the partners arises from a contract, and the agreement defining their rights, duties, and responsibilities is known as a Partnership Deed. Each partner acts as both an agent and a principal of the firm, thereby binding the firm and other partners through their actions done in the course of business.

Objectives of Partnership

The main objectives of forming a partnership are as follows:

1. Profit Sharing
   To carry on business with the aim of earning and sharing profits among the partners.
2. Pooling of Resources
   To combine capital, skills, experience, and expertise of different partners for efficient business operations.
3. Risk Sharing
   To distribute business risks and losses among partners instead of bearing them individually.
4. Expansion of Business
   To enable growth and expansion by bringing in additional capital and managerial abilities.
5. Better Management
   To ensure efficient decision-making and management through collective participation.
6. Legal Recognition of Mutual Rights
   To define and protect the legal rights, duties, and obligations of partners through a contractual relationship.