Explanation:


Partnership is a type of business organization where two or more people come together to carry on a lawful business with a view to earning profits. A partnership is established by an agreement, which can be either written or oral. The agreement sets out the terms and conditions of the partnership, including the rights and duties of the partners, the nature of the business, the duration of the partnership, and the sharing of profits and losses.

Agreement:


The agreement is the most important element in the formation of a partnership. It is a legally binding contract between the partners and establishes the terms and conditions of the partnership. The agreement can be either written or oral. However, it is always advisable to have a written agreement in order to avoid any misunderstandings or disputes between the partners.

Lawful Business:


The partnership must be established for a lawful business. A partnership formed for an unlawful purpose is void and illegal. The business must not be against public policy or morality.

Section 4:


Section 4 of the Indian Partnership Act, 1932 defines partnership as "the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all". This means that the partnership is established when two or more persons enter into an agreement to carry on a lawful business and share its profits.

Limited Liability Partnership:


In recent years, the concept of Limited Liability Partnership (LLP) has been introduced in India. An LLP is a partnership in which the partners have limited liability. It combines the benefits of a partnership and a company. An LLP is established by filing an incorporation document with the Registrar of Companies.