A partnership is a business structure where two or more people agree to work together to achieve a common goal.
There are several types of partnership arrangements. In a general partnership, all partners share liabilities and profits equally. In other types of partnerships, profits may be shared in different percentages or some partners may have. Partnerships may also have a "silent partner," in which one party is not involved in the day-to-day operations of the business.
The type of partnership that business partners choose will depend on how they want to manage day-to-day operations, who is willing to be financially liable for the business, and how they want to pay taxes.
In India, the operation of partnership firms is governed by the Indian Partnership Act of 1932. Those who unite to create a partnership firm are referred to as partners, and the formation of the partnership firm is based on a contractual agreement among these individuals. The agreement among partners is commonly referred to as a "partnership deed.
Like any business structure, a partnership comes with both benefits and drawbacks.
Most sole proprietors do not have the time or resources to run a successful business alone, and the startup stage can be the most time-consuming. A successful partnership can increase the chances that a business will launch successfully by allowing partener to pull their resources and abilities.
Creating partnership can also make the day-to-day operations of a business more manageable than they would be if only one person were running things. Partners to benefit from one another's labor, time, and expertise. Moreover, a shrewd partner can also provide additional perspectives and insights that can help the business grow.
There is, however, risk in joining a partnership. In addition to sharing profits, the partners may also assume responsibility for any losses or debts from the other partners. There is also a higher chance of conflict or mismanagement. When the time comes to exit, it may be harder to reach an agreement about selling the business.