FabReads Digest with Law 059 – Forms of Business Organisations- Partnership (Business Law)
Partnership is a form of business organisation that deals with the relationship existing between persons with the common aim of making profit. There are two types of partnership namely general partnership and limited partnership. Follow the link below to read on Corporation.
This allows both partners to invest their money, property or labour etc to the business and are both 100 percent liable for business debts. They do not require any formal agreement. This partnership can be verbal or implied between the business owners.
It requires formal agreement. It requires the owners to file paperwork with the state and compose formal agreements that describe all of the important details of the partnership, such as who is responsible for certain debts. The paperwork is known as the certificate of partnership. It allows partners to limit their own liability for business debts according to their portion of ownership investment.
ADVANTAGES OF PARTNERSHIP
- It is easy and inexpensive to establish as it requires minimal paperwork and documents.
- They combine their skills and expertise.
- There is division of labour which reduces the work load on each partner and makes them finish on time.
- They share the total profits of the company .
- Shared resources provides more capital for the business.
- Similar flexibility and simple design of a proprietorship divide profit.
DISADVANTAGES OF PARTNERSHIP
- Having more than one person involved in business decisions may lead partners to disagree on some aspects of operation.
- Each partner are 100% liable for business debts and losses and may be pursued in a lawsuit.
- Selling the business is difficult as it requires finding a new partner.
- Business ends when partners disagree and choose to end their partnership.
Examples of partnership form of business organisations are business set up by two or more family members, friends or colleagues etc.