Partnership is a relationship between persons who have agreed to share the profits of a business carried on by all of them acting for all. It is an organization where like minded person come together and pool their resources to form a partnership business.
This form of business is suitable for medium scale enterprises which require greater amount of capital and risks than sole proprietorship. Partnership firm is a non-corporate form of business. The partners are the owners of business and solely responsible for the management and affairs of the business unlike a corporate form of business.
One of the most important ingredient for partnership is that the persons who have agreed to become partners must carry out some business activity. Their can be no partnership without any business activity. Also, the business must be carried on by all the partners or by any one of them acting for all. Thus, each partner is both an agent and a principal for all other partners.