Partnership Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Partnership, written in plain English, along with examples of how it is used.
What is Partnership?
It is referred to the assiciation of two or more persons, also known as partners, with common interest to perform a business with a motive to make profit. Each partners invest time and money into the business and have individual responsibilities as decided in the a partnership deed created at the formation of business. Each partner is liable to the extent of personal assets unless the partners are limited in nature. The percentage share of profit and losses and other conditions to be followed is mentioned in the deed, which generally reflects the agreement made by all the partners collectively.Partnership agreement can also be based on the oral agreement.
History and Meaning of Partnership
Partnership is a business structure that has been around for centuries. The concept of partnership can be traced back to medieval times, where merchants formed alliances to trade and minimize risk. Since then, partnership has evolved into a modern business structure that is recognized by law in many countries. Partnership is a type of business association where two or more people come together to carry on a business with a view to making a profit. In a partnership, each partner contributes resources such as capital, labor, and skills, and shares in the profits and losses of the business.
Examples of Partnership
John and Tom run a law firm together. They are both general partners and share profits and losses equally.
Mary and Jane formed a limited partnership to start a restaurant. Mary is the general partner, and Jane is the limited partner who provides capital but has no say in the operation of the restaurant.
Two doctors form a partnership to open a clinic. They share expenses, such as rent and staff salaries, and split the profits based on their ownership percentages.
A husband and a wife who are both skilled carpenters decide to start a furniture-making business. They form a partnership and contribute equally to the business.
Legal Terms Similar to Partnership
Corporation: A legal structure where a group of shareholders own a business.
Limited Liability Partnership (LLP): A hybrid business structure that combines the flexibility of partnership with the limited liability of a corporation.
Sole Proprietorship: A business structure where the owner is solely responsible for the debts and obligations of the business.