The essential requisites of an ideal partnership are as follows: 1. A Written Agreement 2. Common Purpose 3. Long Duration 4. Good Faith 5. Sufficient Capital 6. Registration.
Requisite # 1. A Written Agreement:
In order to avoid any complications, disputes, misunderstanding, it is always desirable that there should be a written agreement among the partners. Agreement should contain full details about capital, sharing of profits, extent of authorities of each partner and their rights and duties.
Requisite # 2. Common Purpose:
All the partners must work with great zeal. They should work with highest co-operation and the greatest common advantage. Each partner should make his contribution to the success of the business according to one’s capital skill, knowledge and personality.
Requisite # 3. Long Duration:
The duration of an ideal partnership should be as long as possible because it is the long partnership that can ensure efficiency and effective control and results in prosperity. If the duration is small, the partners look more towards the ending of partnership than to the consolidation and development of the business.
Therefore, it should be the endeavour of all the partners to extend the life of partnership by working honestly, skillfully and avoid internal differences and disputes.
Requisite # 4. Good Faith:
Honesty of purpose and fair dealings are the fundamental principles for the well-being of the partnership. Each partner should fully trust other partners and each partner should prove worthy of the trust reposed in them.
While selecting a partner you have to be careful and select only when you are confident of his honesty, sincerity and purposefulness. The number of partners should be as small as will bring in the requisite resources, human as well as material.
Requisite # 5. Sufficient Capital:
The necessary funds, both long-term and short-term use, should be available sufficiently. Long-term funds would be supplied by partners as capital, and other may be obtained by loan. To maintain sound financial position of the firm, drawing by the partners should be as less as possible and part of the profits must be ploughed back to the business for further development.
Requisite # 6. Registration:
The registration of the partnership is not compulsory. But to avoid some complications, it should be registered with the Registrar of Firms soon after its formation. Because an unregistered firm cannot sue outsiders although outsiders can sue it.