Meaning of Partnership:

Partnership is defined under Section 4 of the Indian Partnership Act, 1932 as the 'relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all'. Persons who have entered into partnership are individually called 'partners' and collectively called a 'firm'. The name under which the business is carried on is called the 'firm's name'.

Chief Characteristics of Partnership:

1. Two or More Persons: To form a partnership, there must be at least two persons coming together for a common goal. The minimum number of partners is two. As per Section 464 of the Companies Act, 2013, the maximum number of partners in a firm has been prescribed as 50 by the Central Government.

2. Agreement: Partnership is the result of an agreement between two or more persons to do business and share its profits and losses. The agreement becomes the basis of relationship between partners. It can be oral or written, though a written agreement is preferred to avoid disputes.

3. Business: The agreement should be to carry on some business. Mere co-ownership of a property does not amount to partnership. For instance, if two persons jointly purchase a plot of land, they become joint owners, not partners. But if they purchase and sell land for profit, they become partners.

4. Sharing of Profits: The agreement between partners must be to share profits and losses of a business. Though the Partnership Act describes partnership as sharing of profits, the sharing of loss is implied.

5. Mutual Agency: There exists a relationship of mutual agency among the partners. The business is carried on by all or any one of them acting for all. Each partner is an agent as well as a principal.