Partnership Business

Partnership is defined in the Partnership Act, 1932 is the relation between persons who have agreed to share all carry the profits of a business or acting for all. Persons who have entered into a partnership with another called individually ‘partners’ and collectively ‘firm.’ The name under which their business is carried on is called ‘firm name.’ The definition of partnership contains three elements, and they must be present to create a partnership (sec-4).
1. There must be an agreement entered by all the partners. A contract creates a partnership, and that may arise by the operation of law. This operation of law may occur by joint ownership/co-ownership but not partnership. On the death of a partner, his children may inherit the family property, and business and equally may share the business property, but not for the reason that they are partners. The heir can inherit the business property, including goodwill, but they do no become partners until there is an agreement to carry the business as partners.
2. The object of the agreement or contract is to carry on a business. Where there is no combination to carry on the business, there is no partnership. To make a valid partnership, there has a plan of business where all the partners make a profit. The purpose of business partners is expected to be on a legal contract.
3. The business must be carried by all or one of them is acting for all. But all the partners have the right to carry on the business. In the contract of partnership, there is an implied agency; each partner is an agent to each other. Any person can enter into a partnership if he/she has the capacity since collaboration cannot be created without an agreement. A person with an ‘unsound mind’ cannot be a partner.