The characteristics of partnership in business are as follows:
- Two or more people: Partnership requires a minimum of two people. There is no maximum limit in the partnership act. However, the Companies Act has the maximum limit of 10 people for banking business and 20 persons for other businesses.
- Contractual relation: A partnership comes into existence only after a contract or agreement between the partners. It might be an oral or a written contract. However, a written contract is always preferable as it helps in resolving disputes amongst partners, if any.
- Lawful: A contractual business has to be lawful. It must abide with all the rules and conditions as laid down by the Government and Companies Act.
- Unlimited liability: All the partners are liable for the obligations of partnership firm. If assets of the business are insufficient to meet the liability of creditors then personal property of the partners can be considered to meet such liabilities.
- No separate legal existence: In partnership the firm and partners are considered one. Hence, it does not have any separate existence.
- Sharing of profits and losses: Earning profit is the main goal of partnership firm. Hence, the contract must provide the sharing of profit and losses of all the partners. A charitable organization cannot be called a partnership as it does not operate for profits.
- Transfer of shares: There is restriction on transfer of shares to an outsider in a partnership firm. The partner can either transfer his shares to the existing partners or he needs consent from all the partners if he wants to transfer his shares to an outsider.
- Faith and Trust: There has to be utmost faith and trust amongst partners. A business cannot run without these two things. All partners should be honest with each other and there must be mutual understanding and trust amongst them.