What is Partnership Business?

 

What is Partnership Business? 

"Partnership is a type of business in which two or more persons jointly run and manage the business, agreeing to share the profit or loss of the business."

Why is Partnership business formed?

Partnership is formed when a single person cannot manage all the aspects and functions of the business, and seeks to combine his resources, capital, skills and efforts with another person to operate the business effectively.

What are the examples of Partnership Business?

The examples of Partnership business include:

• Law Firms
• Doctor Clinics
• Accountancy Firms etc.

What are the Characteristics of Partnership?

The characteristics of Partnership Business Includes:

• Two or more persons are involved in business activities, which makes it easier to carry the business.

• Partnership is formed under an agreement. In order to avoid any future dispute, this agreement must be in written form.

• Every partner is entitled to receive profit or loss according to the decided ratio.

• In Partnership Business, no partner can transfer his rights or shares to another person without the consent of other partners.

What are advantages and disadvantages of Partnership?

Advantages:

➤ Larger Capital: In Partnership, every partner provides his shares of capital for the business, which results in larger capital. The scale of production can also be enlarged with the help of larger capital.

➤ Better Decisions: In such business, there is possibility of better and careful decisions through mutual consultation and discussions regarding business policies.

➤ Services of Experts: In this business, A firm can easily hire the qualified and experienced persons on salary basis or by making them business partners.

➤ Division of Work: In Partnership, the partners work on the principle of divisibility. The workload is divided between each partner to run the business smoothly.

➤ Easy Dissolution: This type of business, Partners may dissolve their partnership at any time with the consent of all partners, as no legal formality is required.

Disadvantages:

➤ Unlimited Liability: In Partnership business, the liability of partners is unlimited. Their personal property can be sold for the payment of firm's debts.

➤ Chances of Dispute: In partnership, the chances of disagreement on decisions can be high, which can result in dispute among partners and can ultimately lead to unpleasant working environment.

➤ Delay in Decisions: In this business, any partner cannot take the decision independently. Sometimes, the partners do not easily agree to each other proposals or suggestions which results in delayed decisions.

➤ Lack of Secrecy: In case of misunderstanding or disputes among partners, the business secrecy can be revealed.

➤ Limited Life: The life of Partnership is limited and dependents on the will of partners. In case of retirement of any partner or the entry of new partner, the old partnership may come to an end and partners enters into new agreement.