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Advantages and Disadvantages of Partnership

   

Added on  2020-01-15

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Advantages and Disadvantages ofPartnership
Advantages and Disadvantages of Partnership_1

Partnership is a type of organisation where two or more person come together to investtheir personal saving, skills and knowledge and other available resources with them. Thisagreement is generally made by the firm with an aim to share profit and loss together (Ribstein,2000). In regard to this, partners also share risk and reward that come in their way at the time ofoperating business. In other words, it can be said as an organisation in which numbers of peoplecome together with an aim to share and manage all the debts, liabilities and earning. The federal institution of authorities has identified two types of partnership. One islimited partnership and another is general partnership. Prior is a type of partnership in whichboth the general and limited partners are involved (Charness and Dufwenberg, 2006). Whereaslatter is fully liable to hold and manage all the activities of the organisation and they are alsoliable to anticipate the liabilities. This type of partners has full control on the operations andworking of the firm. On contrast to this, limited partners are those who only function as shareholders. Theyhave no control over the working of the company (Lucio and Stuart, 2004). For instance; Larry isa baker who want to start up a business of foodie cookie, but she does not have enough capital.She went to John who has enough capital but has no idea about the business, but he finds a goodopportunity to invest in the business. In lieu of this, they entered into a limited partnershipagreement. Therefore in regard to this, Larry is a general partner and John is a limited partner. Similarly, on the other hand, in case of general partnership, partners are liable to manageand control all the activities of the firm. Besides this, they are liable to anticipate theresponsibilities in respect of partnership indebtedness and obligations (Swanson and Samy2002). For example; Tom and Jerry decided to open a business with a name T. J. Ltd. Both ofthem do not want to do anything special with an aim to form a general partnership. Thus, onceboth of them agreed upon the same thing to form a business then; in that case general partnershipwill be formed without doing anything. If partners enter into a general partnership then in that case they are not required to payany tax on income. Besides this, all of them can even file for a tax return individual. This type ofpartnership is easy to establish (Partnership – advantages and disadvantages, 2016). Chance ofraising funds also increases when two or more individual are working in collaboration. This typeof working together will provide high moral support to all the partners and will allow them to1
Advantages and Disadvantages of Partnership_2

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