Partnership Firm

A partnership firm is a business structure formed by two or more individuals who agree to carry on a business together with the aim of making a profit.

Partners: Partnership firms are owned and operated by two or more individuals known as partners. Partnerships can have a maximum number of partners as per the laws of the jurisdiction, but typically there is no maximum limit. The partners contribute capital, skills, and resources to the business and share the profits and losses according to the terms of the partnership agreement.
Mutual Agency: One of the key characteristics of a partnership is the concept of mutual agency, which means that each partner can legally bind the partnership and other partners to business agreements and obligations. This joint liability is a fundamental aspect of partnerships.
Profit Sharing: The profits generated by the partnership are distributed among the partners based on the terms agreed upon in the partnership agreement. Typically, profit sharing is proportional to each partner’s contribution to the business, but this can vary depending on the agreement.
Unlimited Liability: In a general partnership, partners have unlimited personal liability for the debts and obligations of the partnership. This means that the personal assets of the partners can be used to settle business debts and legal obligations.
Flexible Structure: Partnership firms offer flexibility in terms of management, decision-making, and ownership. Partners have the freedom to make business decisions collectively, and the partnership agreement can outline the roles, responsibilities, and rights of each partner.
Taxation: In most jurisdictions, partnership firms are not taxed at the entity level. Instead, the profits and losses of the partnership “pass through” to the individual partners, who report them on their personal tax returns. This avoids the issue of double taxation faced by corporations.
Registration: While partnerships can operate without formal registration in some jurisdictions, it’s often advisable to register the partnership with the relevant government authorities to establish legal recognition and clarity on rights and obligations. Registration requirements vary depending on the jurisdiction.