You can learn about: 1. The Meaning and Definition of Partnership after reading this post. 2. The Need for Collaboration 3. Identifying Characteristics, Features, or Elements
Partnership’s Meaning and Definition: A partnership is a group of two or more people who plan to carry on a legal business together with the aim of profit sharing. On an agreed-upon basis, the partners provide resources and share responsibility for operating the company.
Partnership is described as:
The following are some of the most common concepts of partnership:
- “A partnership or company, as it is also called,” writes Kimball and Kimball, “is therefore a group of men who have joined resources or services for the prosecution of some enterprise.”
- “Partnership is an arrangement between individuals with contractual capacity to carry on a business in common with a view to private gain,” according to L. H. Haney.
- “Two or more persons can form a partnership by making a written or oral agreement that they will jointly assume full responsibility for the conduct of a business,” according to Dr. John A. Shubin.
“The partnership may be described as the relationship occurring between persons who agree to carry on a business as co-owners for profit,” says Charles W. Gesternberg.
- A partnership has two or more members, each of whom is responsible for the partnership’s obligations, according to Dr. William R. Spriegal. Each partner has the power to bind the others, and each partner’s assets can be used to pay the partnership’s debts.”
Definitions in the Law:
- According to the Partnership Act of the United States of America, a partnership is “an arrangement of two or more individuals for the purpose of carrying on, as co-owners, a company for profit.”
- “The connection which exists between persons carrying on a business in common with a view to profit,” according to the English Partnership Act of 1890.
- “Partnership is the relation between persons who have agreed to share the profits of a company carried on by both or any one of them acting for both,” according to Section 4 of the Indian Partnership Act, 1932.
Individuals who form a partnership are referred to as “partners,” and the firm as a whole is referred to as “firm.” The ‘firm name’ is the name by which the company is performed.
- Partnership is Required:
The constraints of sole proprietorship necessitated the formation of a partnership. To put it another way, partnership arose as a result of the shortcomings of sole proprietorship. Financial resources and administrative abilities were restricted in a sole proprietorship. One individual could only provide a small amount of capital and therefore could not start a large-scale company.
Also the most basic management skills could not be provided by a sole proprietor. A single owner could not easily and efficiently control all operations. The sole proprietor’s risk-bearing ability was also reduced.
As the company’s operations began to grow, it became necessary to raise additional funds. As a company’s size grows, the sole proprietor finds it difficult to run the company and is forced to enlist the assistance of outsiders who can not only provide additional resources but also assist him in efficiently and effectively managing the company’s operations.
As a result, more people became involved in forming groups to conduct business, and the collaboration model of organisation was born. It is the best organisational structure for a business that requires a moderate amount of capital and a diverse management team.
In a nutshell, the partnership model of organisation arose as a result of the shortcomings of the sole proprietorship.