What is Partnership


According to section 4 of the Partnership Act of 1932,”Partnership is defined as the relation between two or more persons who have agreed to share the profits of a business run by all or any one of them acting for all”. This definition superseded the previous definition given in section 239 of Indian Contract Act 1872 as – “Partnership is the relation which subsists between persons who have agreed to combine their property, labor, skill in some business, and to share the profits thereof between them”. The 1932 definition added the concept of mutual agency.



  • More chance to procure more capital for the business
  • There is more chance have borrowing capacity
  • There is opportunity for income splitting, an advantage of particular importance due to resultant tax savings.
  • There is a wider pool of knowledge and skills
  • It’s easy to change your legal structure later if circumstances change.


  • The liability of the partners for the debts of the business is unlimited.
  • Since decisions are shared, disagreements can occur among partners and management.
  • There is no more secrecy in the business.

Partnership –Deed:

A partnership deed is a written legal document to avoid unnecessary misunderstanding, harassment and unpleasantness among the partners in the event of any dispute. For mutual benefit, the registration of Deed of Partnership is made under the Indian Registration Act, 1908 so as to avoid apprehension of the Deed of partnership being destroyed or mutilated in the possession of the partners. A deed of partnership is required to be made out and registered under the Indian movable property Act together with other movable properties involved. An instrument of partnership may be constituted by more than one document.

The following are the essential characteristics of a partnership-deed:

  • Names of the partners and address of the firm.
  • Nature of business carried on.
  • Date of commencement of business.
  • Duration of partnership.
  • Capital contribution of each partners.
  • Profit sharing ratio.