Identify the essential features of partnership.

(A) Agreement between persons
(B) Partners should carry some Business
(C) No restriction on the number of partners
(D) Sharing of profits/losses in agreed ratio between partners
(E) No. of partners is restricted by partnership Act-1932

Choose the correct answer from the options given below :

(A), (B), and (D) only

The correct answer is Option (2) → (A), (B), and (D) only

(A) Agreement between persons- A partnership firm is not a separate legal entity. But according to the act, a firm must be formed via a legal agreement between all the partners. So a contract must be entered into to form a partnership firm.

(B) Partners should carry some Business- There should be some business which is carried on by the partners. Partnership should not be for charitable purpose. The agreement should be to carry on some business. Mere coownership of a property does not amount to partnership.

(C) No restriction on the number of partners- There should be a minimum of two members. However, the maximum number will be 50.

(D) Sharing of profits/losses in agreed ratio between partners- The agreement between partners must be to share profits and losses of a business. Though the definition contained in the Partnership Act describes partnership as relation between people who agree to share the profits of a business, the sharing of loss is implied. Thus, sharing of profits and losses is important. If some persons join hands for the purpose of some charitable activity, it will not be termed as partnership.

(E) No. of partners is restricted by partnership Act-1932- By virtue of Section 464 of the Companies Act 2013, the Central Government is empowered to prescribe maximum number of partners in a firm but the number of partners can not be more than 100. The Central government has prescribed the maximum number of partners in a firm to be 50.