1. A partnership is a business relationship entered into by a formal agreement between two or more persons or corporations carrying on a business in common.
2. The capital for a partnership is provided by the partners, who are liable for the total debts of the firms and who share the profits and losses of the business concern according to the terms of the partnership agreement.
3. Partnerships (other than banking companies) are generally limited in size to twenty partners.
4. The interest of a partner is transferable only with the prior consent of the other partner(s).
5. However, a partner’s right to a share of the partnership income may be received in trust for another person.
6. The partnerships are classified into the following two categories for the purpose of taxation:
i. Registered Firms
ii. Unregistered Firms
7. The income of the registered firm is subject to Super Tax before distribution to the partners.
8. Also the individual income of the partners is subject to income tax at the usual rates.
9. The unregistered firms, income tax may be levied on the firm’s income and the partners are not liable to pay tax on the shares of profit received from the unregistered firm(s).