Partnership , Features, Advantages and Disadvantages of Partnership

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            -: Partnership :- 

According to Indian partnership act 1932 , Partnership is defined as - " The relation between two or more persons who have agreed to share the profits from a business carried on by either all of them or any of them on behalf of / acting for all , is known as partnership " . 

                A partnership must be a result of an agreement between two or more individuals . The agreement must be built to share the profits obtained from the business . The entity is collectively called a ' Partnership Firm ' and all the individual members are the ' Partners ' . 

Features of Partnership :- There are following features in the partnership - 

1- Formation/Contract :- According to the act 1932 , a firm must be formed via a legal agreement between all the partners . So , a contract must be entered to form a partnership firm . 

2- Unlimited Liability :- The partners are all individually and jointly liable for the firm and the payment of all debts . This means that even personal assets of a partner can be liquidated to meet the debts of the firm . 

3- Continuity :- The death or retirement or bankruptcy or insolvency or insanity of a partner will dissolve the partnership . The remaining partners may continue the partnership if they choose , but a new contract must be drawn up . 

4- Number of Members :- As we know that there should be a minimum of two members for a partnership . For a banking business , the number of partners must not exceed ten . For a business of any other nature , the maximum number is twenty . 

5- Principle Agent Relationship :- While dealing with firms transactions , each partner is entitled to represent the firm and other partners . In this way , a partner is an agent of the firm and of the other partners . 

Advantages of Partnership :- 

                                                          The advantages of partnership are as follows - 

1- Easy Formation :- It is relatively easy to form legal formalities associated with formation are minimum . Through , the registration of a partnership is desirable , but not obligatory . 

2- More Capital Available :-  Partnership overcomes the problems of funds , because there is more than one person who provide funds to the enterprise . It also increases the borrowing capacity of the firm . 

3- Combined Talent , Judgment and Skill :- As there is more than one owner in partnership , all the partners are involved in decision making , usually partners are pooled from different specialized areas to complement each other . 

4- Diffusion Risk :- In partnership , the losses of the firm are shared by all the partners as per their agreed profit sharing ratios . 

5- Flexibility :- The partners can easily appreciated and quickly react to the changing conditions . 

Disadvantages of Partnership :- The disadvantages of partnership are given as - 

1- Unlimited Liability:- In partnership firm , the liability of partners is unlimited . The partners , personal assets may be at risk if the business can not pay its debts . 

2- Divided Authority :- Sometimes disagreements between the partners over enterprise matters have destroyed many a partnership . 

3- Lack of Continuity :- Death or withdrawal of one partner causes the partnership to come to an end . So , there remains uncertainty in continuity of partnership . 

4- Risk of Implied Authority :- Risk involved in decisions taken by one partners is to be borne by other partners also . 

5- Lack of a Central Figure :- Leadership can both uplift and derail a firm . Combined ownership takes away the possibility of leadership and lack of leadership leads to directionless operations .