The businessman is expected to possess adequate skill, ability, experience, knowledge of buying and selling besides capital to become successful in his business.  But it is difficult to find a person with all such requirements.  One may possess knowledge about business but no capital or vice-versa.  Hence there arises the need for entering into partnership where two or more persons join together and set up a business with common ownership and management under a voluntary agreement.
Definition:
The Indian Partnership Act, 1932 defines the Partnership as- “the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all”.
Persons who enter into partnership are individually called ‘partners’ and collectively ‘a firm’.
Characteristics:
1. Relationship Between Two Or More Persons
AT Least two persons are required to form into partnership.  The partnership act does not mention the maximum limit.  But the companies act, 1956 specifies that the partnership consisting of more than 10 persons for a banking business and 20 persons for other business would be illegal.
2. Agreement:
The partnership is set up by an agreement between persons called partners.
3. Lawful Business:
An association of persons will become a partnership only when it is meant to do some lawful business.
4.  Profit Motive:
   The aim of partnership should be to earn profit and to share them at an agreed basis.

5.  Principal-Agent Relationship:
The business must be carried on by all or any one of them acting for all.  Thus every partner is an agent of other partners.

6.  Unlimited liability:
The liability of each partner is unlimited.  Each partner is jointly and severally liable for all debts of the firm.  They can be called up to pay the debts from their personal property of the firm’s assets are insufficient.
7.  No separate legal entity:
The partnership firm has no separate legal entity.
8. Utmost good faith:
A partnership is based on agreement which is based on trust and confidence of partners.  They must be honest.  They must disclose all material facts relating to the business.  They should not make any secret profit.
9. Restriction on transfer of interest:
The partner can not transfer his share to an outsider with out the consent of all other partners.
10 . Unanimity of consent:
No change may be made in the nature of the business without the consent of all partners.
11. Other features
1. No legal formalities are required to form partnership.
2. The capital of partnership is contributed by partners; the amount of contribution need not be equal.
3. The control of the organisation is shared by all the partners.
4. Every partner has a right to take part in the management of the business.
5. The partners may or may not fix the duration of the partnership.
6. The income of the partnership is taxed on slab system.