Posted by Chester Morton / Friday, 2 June 2017 / No comments
The features of a partnership organization
PARTNERSHIP
Introduction
Partnership describes a business organization in which two or more persons agree to come together to set up and manage the business unit. In a partnership these individuals consent to put their resources together in forming the company. The resources of people who enter into a partnership business usually will include both financial and managerial. It means that not only have the partners agreed to invest their money into the business, they also take up some roles in managing the company, in other words they may decide to manage the company jointly. Individuals who own a partnership business organization therefore share in both the profit and the risks in case of a loss.
Introduction
Partnership describes a business organization in which two or more persons agree to come together to set up and manage the business unit. In a partnership these individuals consent to put their resources together in forming the company. The resources of people who enter into a partnership business usually will include both financial and managerial. It means that not only have the partners agreed to invest their money into the business, they also take up some roles in managing the company, in other words they may decide to manage the company jointly. Individuals who own a partnership business organization therefore share in both the profit and the risks in case of a loss.
CHARACTERISTICS OF PARTNERSHIP
A partnership business organization involves at least two or more persons.
In some countries, the laws may set a limit to the number of people who can come together to form a partnership business. Usually the limit depends on the type of business activity which the company intends to engage in. For example, in some countries, the maximum number of partners will be ten if the company is engaged in banking, and up to twenty if the company is involved in agricultural related business. Where there is a limit to the number of partners, any extra person will make the partnership illegal before the law.
A partnership business organization involves at least two or more persons.
In some countries, the laws may set a limit to the number of people who can come together to form a partnership business. Usually the limit depends on the type of business activity which the company intends to engage in. For example, in some countries, the maximum number of partners will be ten if the company is engaged in banking, and up to twenty if the company is involved in agricultural related business. Where there is a limit to the number of partners, any extra person will make the partnership illegal before the law.
Partnership involves
contractual relationship.
A partnership is created based an agreement among the partners, who have agreed to be part of the partnership. To be a partner in a partnership business firm, one must be competent to contract. This means that minors, people who are not of sound mind and people who are insolvent (hugely in debt) cannot form partnerships.
A partnership is created based an agreement among the partners, who have agreed to be part of the partnership. To be a partner in a partnership business firm, one must be competent to contract. This means that minors, people who are not of sound mind and people who are insolvent (hugely in debt) cannot form partnerships.
Sharing of Profit
In a partnership there must be an agreement on how the firm's profit and loses would be shared. Often this is in proportion to both the financial and material resource contributed by each partner in the business. The higher a partner’s percentage of contribution to the partnership, the greater the profit one takes and vice versa.
In a partnership there must be an agreement on how the firm's profit and loses would be shared. Often this is in proportion to both the financial and material resource contributed by each partner in the business. The higher a partner’s percentage of contribution to the partnership, the greater the profit one takes and vice versa.
Existence of Lawful Business
Just like other business types, partnership must be a lawful business. Where two or more people are involved in activities such as smuggling, or any such illegal activities, it cannot be called a partnership. It is a breach of the laws of the land and such “partners” when found must be brought before the law and punished.
Just like other business types, partnership must be a lawful business. Where two or more people are involved in activities such as smuggling, or any such illegal activities, it cannot be called a partnership. It is a breach of the laws of the land and such “partners” when found must be brought before the law and punished.
A partnership involves a Principal-Agent
Relationship
In a partnership, all partners are principals and agents at the same time. When a partner carries out a business deal on behalf of the organization, he/she becomes an agent of the other partners who then become the principal. This role is reversed when those who are principal at one time also act on behalf of the business. They also become agents in turn while the other(s) is/are deemed the principal.
In a partnership, all partners are principals and agents at the same time. When a partner carries out a business deal on behalf of the organization, he/she becomes an agent of the other partners who then become the principal. This role is reversed when those who are principal at one time also act on behalf of the business. They also become agents in turn while the other(s) is/are deemed the principal.
A partnership involves Unlimited Liability
The partners involved in a partnership business organization are unlimitedly liable for the losses that the business may incur. The partners are individually as well as jointly liable for the debt and obligations of the business. This means that when the business becomes bankrupt, the individual partners' properties can be sold to offset the debt of the business.
The partners involved in a partnership business organization are unlimitedly liable for the losses that the business may incur. The partners are individually as well as jointly liable for the debt and obligations of the business. This means that when the business becomes bankrupt, the individual partners' properties can be sold to offset the debt of the business.
In a Partnership, registration of business is
voluntary
It is not compulsory to register a partnership business organization. However, not registering the business may expose the business to some problems. Some of the problems/limitations that confronts an unregistered partnership are related bellow:
It is not compulsory to register a partnership business organization. However, not registering the business may expose the business to some problems. Some of the problems/limitations that confronts an unregistered partnership are related bellow:
1, Even though outsiders can take legal action
against the firm, the firm itself cannot do the same to outsiders.
2, When there is a dispute among the partners,
they cannot settle the case in the law court if the business is not
registered.
SAMPLE QUESTIONS
1. a. What is partnership?
b.
Explain six features of partnership.
