PARTNERSHIPS - TYPES, ADVANTAGES AND DISADVANTAGES

Partnership is when two or more people assemble together to carry on a business with the aim of making profits. The partners in the business agree to share the assets and liabilities of the business jointly. By the name partnership it means that the business is owned jointly by partners, and the partners have equal rights and responsibilities. Any members of the partnership have right to making binding contract on behalf of their business.


Partnership Deed              
Partnership deed is nothing but the agreement that unites all the members of the partners, the agreement inter alia includes;
1.      Composition of membership and their various individual contributions    
2.      Title or name of business and location.
3.      Decision on a deceased member
4.      Incentive or remuneration of active members
5.      Modality of sharing profits
6.      Admission of new members (i.e. conditions0
7.      Dissolution or winding up of business
TWO TYPES OF PARTNERSHIP 
            Usually there are two types; ordinary partnership and limited partnership.
Ordinary Partnership: In this type of partnership, all members takes equal risk jointly, have equal right, equal privilege, enjoy equal powers and they possess unlimited liability. This means that, if say 2 or 5 persons enter into ordinary business partnership and there is a case of some debt to be settled form the assets of the business which the asset cannot settle, the personal assets of, the partnership will be sold by their creditors. And of course if any member has no assets to be sold, the other remaining 4 members should bear the full responsibility of the debt.
Limited Partnership:-  Limited partnership only differs from ordinary partnership in that not all members have unlimited liabilities in which case their liabilities are limited to the amount of capital each contributed. However, the law provides that at least one member must be an unlimited or ordinary or a general partner who should now bear the full risk of the business enterprise.
Kinds of Partners:- Usually partners consist of three types, Active, sleeping and general partners. Let us examine each of them.

Advantages
1.                  A partnership has a greater prospect of raising capital and expanding its business than the sole proprietorship.
2.                  The partners have equal rights and therefore the actions of one partner are borne by all members and are jointly liable for all debts and risks rather than one man in the sole proprietorship.
3.                  A partnership lasts much longer than a sole proprietorship because unlike the sole proprietorship, the death of any member of the partnership does not make the partnership to collapse.
4.                  Management functions may be assigned to members according to their skills and their areas of  specializations.
5.                  There is flexibility which makes it easier to admit new members with good and new idea that will help the business to grow.
6.                  Profits in partnership are shared according to laid down rules i.e. personal efforts and capital contributions are the common criteria in sharing profits.
7.                  There is good division of labour in partnership
8.                  There is close cordial relationship between partners and customers.
9.                  Talents and creative are pulled together because in the management and decision making every member of the partnership brings out his own ideas and opinions which are well considered.
10.             Profits are not declared or published as such partnership enjoys degree of privacy.

Disadvantages: The disadvantages inherent in partnership are as follows:
1.                  The actions of one partner are borne by all members, which means that multiplicity of risks could be prevalent.
2.                  A partnership does not enjoy a quick decision taking may be difficult to get all partners to make decisions
3.                  Profits are shared by many people quite unlike the sole proprietorship where one man owns the total profits.
4.                  One major problem of a partnership as a business organization is assets can be sold by a creditor.
5.                  There is a serious danger when lazy and dishonest members are admitted.
6.                  The membership is not more than twenty as such this can limit more capital flow into the business.
7.                  The success and continues existence of the partnership is threatened because the business depends on upon the ability of partners to work harmoniously with each other, but the harmony is not guaranteed
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