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Partnership

A partnership is an arrangement where parties, known as business partners, agree to cooperate their mutual interests and operate a business and share its profits which will be carried out by any one or by all with respect to the Section 4 of the Indian Partnership Act.

 

A Partnership consists of mainly three elements which are as follows:

1. There must be a contract between two or more persons.

2. They should build another contract for sharing the profits and losses in that business.
3. Partnership firm can be handled by all or it can run by a single person representing the rest.

Essential Elements of a Partnership

Below there are some key elements which is required for the Partnership formation. We will discuss about them with brief explanation below.

An Agreement

An agreement helps to establish rules for how the partners will manage business profits, losses, company management, ownership and how to invest in the partnership. Partner mainly refers between two partners but in context there will be no limit how many partners will form a business. The nature of the Partnership can be contractual basis.

 

According to the Partnership Act agreement should be done to express the relation between the partners, it also shows mutual understanding between them, this agreement can be done in writing or oral. In Partnership agreement, the partners are equally responsible for the debt in the Partnership. In this business the profit can be split however there should be clear clause in partnership agreement regarding profit-sharing.

Running the Business

To run the business Partnership should be carried out by all the partners or any one of them representing for all. This is the main principle of partnership law. A partner who runs the business will act as the agent for remaining partners. Rather than sharing the profit the important thing the partners should have mutual understanding. if the main element interaction between partners is necessary without good interaction, no partnership will continue. So for smooth running of business mutual interaction is more important.