Define partnership and discuss its main characteristics
Answers
Partnership:
A partnership is an agreement between two or more parties who are joining hands for a business venture, having agreed to share the profits and losses arising from it.The management and operations of the business are to be performed either by all the partners or any of them, acting for all the partners.
The main characteristics of partnership include:
1. Membership: At least two persons are needed to begin a partnership while the maximum number of members is limited to 100.
2. Unlimited liability: The members of a partnership have unlimited liability, which means they have to collectively and individually be liable for the firm’s debts and obligations.
3. Sharing of profit and loss: The main purpose of the partnership is to share profit in the agreed ratio, this ratio is set by the partners themselves and is written down while making the partnership agreement.