A Partnership is a type of business in which a formal agreement is reached between two or more people who agree to be co-owners, share the responsibility of running the organization, and share the income or loss generated by the business.
Features of Partnership:
- Agreement between partners: It is a group of two or more individuals, and a Partnership arises from an agreement or contract.
- Two or more: At least two people must have a common goal in order to articulate it.
- Profit Sharing: Another important element of this is that agreements between partners must share the benefits and losses of trading concerns.
- Business Motivation: It is important for a company to run any business and should have a motivation to make a profit.
- Mutual Business: Partners are both owners and agents of the company. Actions taken by one partner can affect other partners and companies.
- Unlimited Liability: All partners in it have unlimited liability.
- Collective management: One company and one partner. If a contract signs in the name of the company, all partners are responsible for it individually and collectively.
- Non-transferable shares: Partners may not transfer their interests to another person without the consent of the other partner.
Types of Partnership
Partnerships divides into different types by state or place of business. Here are some general aspects of the three most common types of Partnerships.
Firstly –General
A Partnership is made up of two or more owners who run the business. In this Partnership, each partner represents a company with equal rights. All partners have the right to participate in management activities, decision making and manage the business. Similarly, profits, liabilities, and liabilities evenly shares and evenly divided.
Secondly –Limited
This Partnership includes both general and limited partners. The General Partner has unlimited liability and manages the business and other limited liability partners.
Thirdly –Limited Liability
In a limited liability Partnership (LLP), all partners have limited liability. Each partner protects from the legal and financial mistakes of the other partners.