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8 Essential Elements of Partnership

What is an Ideal Partnership?

An ideal partnership is one in which the partner work in full confidence, trust, and cooperation with one another so that the business is a success. The partners should be able to manage all business activities successfully. There should not be a shortage of funds. All these things are possible only when the choice of partners is correct. A large number of firms have unsuccessful because of suspicion and doubt among partners.

The main requisites of an ideal partnership are as under.

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8 Essential Elements of Partnership:

The characteristic of an ideal partnership are as follow;

  1. Mutual Understanding:

One should choose one’s partner with as much care as one would take in choosing one’s wife. While forming a partnership if care is taken in the selection of the partners who know each other and understand each other problems, then the partnership will grow and prosper.

  1. Common Approach:

The partners should have a common approach to solving the problem of the firms. They must fully realize that if there are differences among them in running the firm, a single partner and create problems for the business.

  1. Good Faith:

For an ideal partnership, it is necessary that all the partners would have complete confidence and faith in each other. Each partner in business should work honestly, sincerely and to his maximum capacity.

  1. Balance of Skill and Talent:

If the partner are educated and experts in the various field of business such as production, marketing , finance etc it will put the business in an advantageous position and help it to grow on stable footing.

  1. Sufficient Capital:

Sufficient capital is essential of partnership.If the long and short term capital requirement of a firm are mainly met by the partners themselves, it will help the from to grow and earn the good reputation and goodwill in the market.

  1. Partnership Deed or Written agreement:

There should be a written agreement among partners. For this purpose, a partnership deed can be made. The duties powers, amount of capital contributed by each partner, profit sharing ration etc must all be clear to the partner before the start of business. The written agreement ensures better understanding good faith and long duration of a firm.

  1. Registration of Firm:

Registration of a firm is essential of partnership.If a firm is registered, it is not only advantageous for the firms itself but also for those who deal with it, an unregistered firm cannot sue outsider but the outsiders can sue the firm in court for recovery of money. An ideal partnership, therefore, must get itself registered to avail of the benefits of registration and for good credit standing in the market.

  1. Long Duration:

The period of the partnership should be long so that the business may be properly set up. The partners get time to understand each other and can create a unity. There should be a continuous effort of all the partners to extend the life of partnership and create an atmosphere of mutual faith and understanding.

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About the author

Salman Qureshi

Salman Qureshi is an Accountant by profession & he loves to write on Commerce & Management Sciences Subject to assist Students. Hope you guys will like his effort.

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