Tables Of Contents
1. Meaning Of Partnership
2. Advantages And Disadvantages Of Partnership
Meaning Of Partnership
A partnership in uni-incorporated business formed by the association of 2-20 person not more than ten. In ordinary partnership who have similar economic interests and share the risks and profit of the business.
The formation of a partnership is one way a sole proprietorship can enlarge his capital, the partners are bend together by a legal document called “DEAL OF PARTNERSHIP” which authorises the rules of the business units such as the type of business to be done, how much capital each partners in management owns, how profits and losses will be shared, how partners will be admitted and how to wond up the business.
Apart from the general partnership, there is also the limited partnership. There are some partners who contribute capital but take no part in the running of the business. They also enjoy limited liability, such limited partners are also called dormant or sleeping partners. But there must be at least one general partner whose liability is unlimited. Limited partnership are not common because people would other from a private limited company. Partnerships are common in the profession law, accounting, where less capital and more of professional skills are required.
Advantages Of Partnership
1. More capital than in sole proprietorship is made available through the contribution of the partners and this makes expansion possible.
2. Decisions are jointly taken by the partner and such decisions are likely to be better than one taken by trusted person.
3. Partners with different skills specialise in the management of different aspects of business e.g purchase, saler, accounting etc & enhances efficiency.
4. The risk of the business are spread out among several persons.
Disadvantages Of Partnership
1. There is back of continuity because each time a partner resigns or dies the partnership is dissolved or reformed.
2. Decisions may take long time to arrive at as the partners may have different views.
3. The profits are split among the partners so that the number of partners the less the share of each.
4. Limited liability since the partnership is not a separate legal entity, each partner is liable without limit of the full extent of his private properly for all the debts of the business unless he is a limited partner.