Characteristics of partnership:
1. Two or more persons: Partnership is the outcome of a contract.
Thus:
(a) There must be at least 2 persons to enter into contract to form partnership.
(b) Minors cannot form a partnership firm as they are incompetent to enter into contract but can be admitted to the benefits of a running firm. c) If these people intend to do banking business, the maximum number can be ten otherwise twenty for the other business.
2. Agreement: The relation of partnership arises from contract and not from status. Though oral agreement is even acceptable but in practice written agreement is much more advisable as disputes can be resolved better with it.
3. Profit sharing: The objective of the business is to make profits and distribute the same amongst partners. Any association initiated to do charity work is not partnership.
4. Unlimited liability: Mostly, the liability of the partners of a firm is unlimited. Their personal properties can be disposed off to pay the debts of the firm if required. The creditors can claim their dues from any one of the partner or from all of them, meaning partners are liable: Individually and Collectively
5. Implied authority: There is an implied authority that any partner can act on behalf of the firm. The firm stands bound by the acts of partners.
6. Mutual agency: The business of partnership can be carried on by all the partners or any one of them acting for all. Thus, every partner is principal as well as agent of other partners and of the firm.
Thus,
(i) Each partner is liable for acts performed by other partners,
(ii) Each partner can bind other partners and the firm by his acts done in the ordinary course of business.
7. Utmost good faith: Every partner is supposed to act honestly and give proper accounts to other partners. Thus, mutual faith and confidence in one another is the main strength of partnership.
8. Restriction on transfer of shares: No partner can sell or transfer his share to anybody else without the consent of the other partners. By giving a notice for dissolution of the firm, a partner can show intention to discontinue as partner.
9. Continuity: A partnership continues up to the time that all partners desire to continue it. Legally, a firm dissolves on the retirement, death, bankruptcy lunacy, or disability of a partner if not otherwise provided for in the partnership deed.
