In addition to 'number of persons', 'profit sharing' and 'agreement', there are various other features of partnership. Explain any six such features.

Question

Accepted Answer

Besides the number of persons, profit sharing and agreement, a partnership is characterised by the following features:

**Unlimited liability**: The liability of partners is unlimited. If the assets of the firm are insufficient to meet its debts, the personal property of the partners can be used to pay the creditors. Every partner is individually as well as collectively liable — creditors can claim the firm's debts from any one or all of the partners.

**Implied authority**: Any partner can act on behalf of the firm in the ordinary course of business, and the firm stands bound by such acts. A partner need not seek express permission before entering into transactions that are normal for the business.

**Mutual agency**: The business can be carried on by all the partners or any one of them acting for all. Every partner is both principal and agent of the other partners and of the firm. Each partner is liable for the acts performed by the other partners and can bind the firm by his acts done in the ordinary course of business.

**Utmost good faith**: Partners are expected to act honestly towards each other and provide proper accounts of the business. Mutual faith and confidence are the main strength of a partnership.

**Restriction on transfer of shares**: No partner can transfer his share or interest in the firm to an outsider without the consent of the other partners. A partner may, however, discontinue his association by giving notice for the dissolution of the firm.

**Continuity**: A partnership continues as long as all the partners desire it. It legally dissolves on the retirement, death, bankruptcy, lunacy or disability of a partner, unless otherwise stated in the partnership deed.

These features reflect the mutual trust on which partnership rests and determine its suitability for ventures requiring moderate capital and managerial ability.