MEANING OF PARTNERSHIP
Partnership form of business organisation came into existence on account of limitations of sole proprietary concerns. The major limitations of sole proprietary concerns are those of shortage of funds, uncertainty about existence, unlimited personal liability etc. In case of a partnership business two or more persons join hands together to do a business. Thus, the risk, funds, responsibility all are shared. The Indian Partnership Act, 1932 is applicable to contracts of Partnership. According to Section 4 of the said Act partnership is “the relation between persons who have agreed to share the profits of a business carried on by all or any ofthcmacting for all”. Persons who have entered into partnership with one another are called individually ‘partncrs’ and collectively a ‘firm’ and the name undcr which the business is carried on is called the ‘firm’s name’.
The term ‘firm’ is merely a commercial notion. Law does not invest the firm with legal personality apart from its partners except for the purposes of assessment of income-tax. A ‘firm’ cannot become a member of another partnership firm though its partners can join any other firm as partners.