Introduction to Partnership

Introduction-: There are different forms of business organisations. There are main forms of business organisations are : sole proprietorship, partnership and companies. Partnerships are similar to sole proprietorship, expect they have more than one owner. The accounting procedures of partnership are similar to those of sole proprietorship. However in case of partnership more detailed record are maintained.

Partnership is popular form of business because they are easy to form and allow several individual to combine their talents and skills in a particular business venture. It provides means to obtain more capital than a single individual cloud have obtained.

Partnerships are very common in the services profession, particularly accounting, law and medicine. Partnerships are also common in wholesale businesses, and, in small retailer stores. A few large industrial and merchandising enterprises also operate as partnerships.

Meaning of Partnership

Partnership is defined by The Indian Partnership Act, 1932 (Section 4) as :

“the relation between persons who have agreed to share the profit of business carried on by all or any of them acting for all.”

In this definition, the term ‘persons’ includes individuals and other partnerships.

Persons who have entered into partnership with one another are called individually ‘partners’ and collectively ‘a firm’. The name under which their business is carried on is called the ‘firm name’.

From the above definition, it is to be noted that partnership consists of three essential elements:

1. there must be an agreement among all the persons concerned. The agreement may be oral or written.

2. the agreement must be to share the profit of the business.

3. the business must be carried on by all or any of them acting for all.

The partnership cannot be formed in the absence of any of the above three elements.