The word ‘Partnership’ in the layman sense implies an agreement between two people to work together or jointly. In accountancy, the meaning of partnership is similar to that in the general sense but with a greater depth. In our context, partnership implies the agreement between two or more people who have decided to carry out a business jointly. The main motive to form a partnership is to earn profit arising out of the business activities. Formal Definition of Partnership is written below
Formal Definition of Partnership
According to the Section 4 of the Partnership Act, 1932, a partnership is an agreement between two or more persons who have agreed to share profits or losses of a business that will be carried by all or any one of them acting for all. The persons who joined their hands to set up the partnership business individually are known as ‘Partners’ and all the partners in the partnership business are collectively known as ‘Firm’. The name under which the partners decided to carry out their business is known as ‘Firm Name’.
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