Number of Partners
The number of partners in a firm shall not exceed 20 and a partnership having more than 20 persons is illegal. When there is partnership between two firms, all the partners of each firm will be taken into account. If the partnership is between the karta or member of Hindu undivided family the members of the joint Hindu family will not be taken into account.
Essentials of a Partnership
- Agreement - The relationship between partners arises from contract and not status. If after the death of sole proprietor of a firm, his heirs inherit firm they do not become partners, as there is no agreement between them.
- Sharing of Profits - The partners may agree to share profits out of partnership business, but not share the losses. Sharing of losses is not necessary to constitute the partnership. The partners may agree to share the profits of the business in any way they like.
- Business - Business includes every trade, occupation, or profession. There must be course of dealings either actually continued or contemplated to be continued with a profit motive and not for sport or pleasure.
- Relation Between Partners - The partner while carrying on the business of the partnership acts a principle and an agent. He is a principal because he acts for himself, and he is an agent as he simultaneously acts for the rest of the partners.