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Partnership is the most common form of business organisation in India. Partnership firms are governed by the provisions of the Indian Partnership Act, 1932. The Act lays down the rules relating to formation of partnership, the rights and duties of partners and dissolution of partnership. It defines partnership as a "relationship between persons who have agreed to share the profits of business carried on by all or any of them acting for all". This definition gives three minimum requirements to constitute a partnership:-
There must be an agreement entered into orally or in writing by the persons who desire to form a partnership.
The object of the agreement must be to share the profits of business intended to be carried on by the partnership.
The business must be carried on by all the partners or by any of them acting for all of them.
Under the Act, persons who have entered into partnership with one another are individually called as 'partners' and collectively as 'firm' and the name under which they run their business is called the 'firm name'.
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