Partnership is a common form of business wherein two or more persons associate to carry on, manage a business and share the profits and losses. Liability of the partners in a partnership firm is joint and several. The Partners are personally liable for the debts of the partnership firm. The profits of the business are divided between the partners in accordance with their share in the firm. There can be a minimum of 2 and maximum of 20 partners in a partnership firm.
A partnership firm is not a separate legal entity distinct from its members. It is merely a collective name given to the individuals composing it. Hence, unlike a company which has a separate legal entity distinct from its members, a firm cannot possess property or employ servants, neither it can be a debtor or a creditor. It cannot sue or be sued by others. Generally small and medium sized businesses with low capital investment opt for partnership registration as this type of business constitution involves less legal complications, low costs and very few legal compliances. Registration of partnership is optional but is always advisable to opt for partnership registration as it gives legal recognition and safety to the business.
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