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Partnership refers to an artificial being brought about by the expedient act of collaborating or pooling of interests, industry or capital of at least two or more persons intended primarily to serve or perform a particular business undertaking or enterprise. In a partnership set up, partners act as agents of each other and of the partnership. Each partner is bound by the acts and representations made by their co-partners in dealing and transacting with third persons.
Partnership formation may take various forms depending on how the partners agree to create it and to carry out their objects and purposes. There are no fixed parameters and strict formalities as regards the formation of a partnership. The king of partnership established relates closely to the kind of liability a partner is assuming. As a general rule, the liability of the partnership is likewise the personal liability of each and every partner. However, partnership agreements may specify the kind liability undertaking that each of the partners is bound to assume. A partner may have a limited liability only which means he is not bound to answer for the liabilities of the partnership beyond his interest or contribution. He cannot be held personally liable for partnership debts. In partnership however, it is a settled rule that despite the concept of limited liability, a partnership should always have at least one general partner to shoulder the partnership liability at his personal expense.
Moreover, a partner may contribute not only money or capital contribution. He may likewise put in his industry in the partnership. Unlike a general partner, an industrial partner cannot be held personally liable for partnership obligations. But despite the multifaceted liabilities of each and every kind of partner comprising a partnership, partnership creditors as well as third persons dealing with the partnership remains fully protected.
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