Video narration
Does sharing profits alone create a partnership? Imagine a school group project: members agree to work together and divide the result. In business, though, the law asks for more. There must be an agreement between two or more persons to carry on a business. They agree to share its profits, and the relationship also includes sharing losses. The business may be carried on by all partners, or by any one acting for all. That is the key: mutual agency. Each partner acts for the firm in the ordinary course of business and can bind the others. So profit sharing alone does not prove partnership. For your ISC exam, remember five essentials: agreement, two or more persons, business, profit sharing, and mutual agency. Under the Indian Partnership Act, 1932, the answer is no: a partnership exists only when people agree to run a business, share its profits, and act for one another.