Characteristics of partnership firm
- Unlimited liability
Proprietor is liable for all the debts of the business. In case the assets are insufficient to meet the debts, the personal property of the proprietor can be attached.
- Difficulty in transfer of shares
Partners cannot transfer their share without the consent of other partners. There may be conflict when done otherwise.
- Higher capital
Many partners invest capitals and there is higher flexibility in capital because new partner can be agreed to be associated and investing can be increased.
- Reduced risk
Partners have right to take part in management. They have the duty to bear risk with proportion too.
- Association of two or more persons
It must be two or more person to enter into contract. Association of two or more persons can only create partnership. In association of two or more persons, maximum and minimum number of persons is not mentioned.
It is set up by agreement between partners. It must be written and legal agreement so that it will reduce dispute.