The Indian Partnerships have the following common characteristics:

1. Legal Entity: A partnership firm is not a legal entity apart from the partners constituting it. It has limited identity for the purpose of tax law as per section 4 of the Partnership Act of 1932.

2. Existence of Business: The existence of a business is an essential feature of partnerships. There can be no formal partnership under the Partnership Act if the partners carry out charitable activities. Section 2 says that business includes any trade, profession or  occupation. What is essential is that the firm must work with the intention of earning profits.

3. Sharing of profit and loss: The main purpose of the partnership business is to share profit in the agreed ratio. However, in the absence of any agreement between partners, the business profits or losses are divided equally among all the partners.

4. Unlimited Liability:  The major disadvantage of partnership is the unlimited liability of partners for the debts and liabilities of the firm. Any partner can bind the firm and the firm is liable for all liabilities incurred by any firm on behalf of the partner. If property of partnership firm is insufficient to meet liabilities, personal property of any partner can be attached to pay the debts of the firm.

5. Partners are Mutual Agents: The business of firm can be carried on by all the partners or any of them acting for all. Act of any one partner is binding on the firm, i.e., all the partners. Thus, each partner is ‘agent’ of all the remaining partners, i.e, partners are ‘mutual agents.’  Section 18 of the Partnership Act, 1932 says "Subject to the provisions of this Act, a partner is the agent of the firm for the purpose of the business of the firm."

6. Mutual agency is the real test: The real test of ‘partnership firm’ is ‘mutual agency’ set by the Courts of India, i.e., whether a partner can bind the firm by his act, i.e., whether he can act as agent of all other partners.

7. Existence of Agreement: The definition of partnership itself makes it clear that there must exist an agreement between the partners to work together and share profits amongst them. The Partnership Act, 1932 nowhere mentions that the Partnership Agreement is to be in written or oral format. Since partnership agreement falls within the purview of contract, the agreement, whether oral or written, between the partners is legally enforceable. A written agreement is, however, advisable to establish existence of partnership and to prove rights and liabilities of each partner, as it is difficult to prove an oral agreement.

8. Number of Partners is minimum 2 and maximum 50 in any kind of business activities: Since partnership is ‘agreement’ there must be minimum two partners. The Partnership Act does not put any restrictions on maximum number of partners. However, section 464 of Companies Act 2013, and Rule 10 of Companies (Miscellaneous) Rules, 2014 prohibits partnership consisting of more than 50 for any businesses, unless it is registered as a company under the Companies Act, 2013 or formed in pursuance of some other law.

9. Continuity: Partnership is not perpetual. An ordinary partnership can be dissolved by any of the partners at any time and the process doesn’t require all the partners to agree. Notice of termination can be served by one or more partners.

Automatic dissolution takes place if:

• a partnership was formed for a specific term or project which has concluded

• one or more partners dies or goes bankrupt

• it becomes illegal to carry on the business of the partnership

Further, Death, bankruptcy, retirement or insanity of any partner can lead to dissolution of the partnership. If the remaining partners are willing to continue business operations, they can do so by entering into a fresh agreement.

1. Competency of Partners : As partnership is essentially a contract, all the individual partners entering into partnership must be legally competent. Thus, minors, insolvent and lunatic persons cannot become partners, although a minor can be admitted to partnership for the purpose of sharing its profits.