Main characteristics of a partnership

A partnership is defined as a relationship that subsists between persons carrying on business in common with a view of profit.

By the virtue of this definition, the following are the characteristics of a partnership:

1. There must be an association of persons.

-Person include not only natural persons, but also artificial persons, like corporations.

-However, S.3 (2) of the Partnership Act 1961 specifically provides that a relationship between members of any company or associations registered as a co-operative society will not constitute a partnership.

-For there to be a partnership, there must not be more than one person.

-However, by the S.47 (2) of the Partnership Act 1961 provides that the number of persons cannot exceed 20 in the case of ordinary partnership.

-Professional partnership is not subject to this limit.

2. The persons must carrying on a business.

-S.2 of the Partnership Act 1961 provides the business to include every trade, occupation or profession.

-It must be shown that the business is presently or currently carried on.

3. The business must be carried on in common.

-What this means is that the partners must have possessed a common intention to carry on a business.

-It is not necessary that all partners be actively involved.

-Even if some partners are simply leave the running of the business to others, on the understanding that they would still benefit from the business, there would still be a partnership.

4. The business must be carried on with a view of profit.

-What this means is that the business must be carried on with a profit motives.

-Non-profit oriented business such as social, recreational or charitable organisation will not be considered as partnerships.