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PARTNERSHIP BUSINESS — Economics Keypoint

PARTNERSHIP BUSINESS

PARTNERSHIP BUSINESS: This is the type of business unit that is made up of two to twenty persons as financiers and profit earners of the business. The capital necessary for the business is also small even though it is bigger than that of sole proprietorship.

Before a partnership is established, a partnership agreement will have to be made and signed by the partners. The agreement however indicates.

  1. The name of the business and partners.
  2. The amount of capital contributed by each of the partners.
  3. How profit and losses will be shared.
  4. Duration of the partnership
  5. The admission of new partners and
  6. The general organization of the business.

Note that the partnership business must be registered within 14 days of its existence and any alteration on the above information must be modified and reported to the registrar within the same 14 days. Partnership can be limited or unlimited.

LIMITED PARTNERSHIP

This is the type of partnership in which the partners’ liability may be committed to the amount of capital he has contributed to business. However such a partner is prevented from taking part in the management of the business.

UNLIMITED PARTNERSHIP

This is the type of partnership in which each partner is liable for all the debt even to the extent of his private property in the event of liquidation. 

Advantages 

  1. There is more resources for expansion.
  2. Risks involved in the business are shared among the partners.
  3. Fair administration is obtainable because the running of the business is shared among    the partners.
  4. The partnership maintains privacy in the affairs of the business.
  5. There is a degree of specialization from the experiences of the partners.
  6. The partnership also enjoys tax advantage because what they pay as tax is not much.

Disadvantages

  1. The death of one partner may cause a setback in the running of the business.
  2. Economics of large-Scale production may not be possible since the capital for the business is small.
  3. Important decision regarding to the welfare of the business may be delayed since each          of the partners must be consulted before decisions are taken.
  4. There is room for misunderstanding since the business is made up of people of different background and business intentions.

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