The Partnership

Question 1

Explain what partnerships are and outline the advantages and disadvantages of this form of business.

The Partnership is an arrangement where partners agree to cooperate to develop their mutual interest. It has to be two or more people to form a partnership.

Being a partnership, the business owners necessary share the profits, the labilities and the decision making. In partnership can be ‘sleeping partners’ who contributes capital but does not take part in running the form.

Advantages of Partnership:

• It is generally easiest to form, manage and run (They are less strictly regulated than companies).
• Partners can share capital (this means that the more partners there are, they can put more money into the business).
• Partners share the decision making and can help each other when they need to.
• Partners can share the responsibility of the running of the business.

Disadvantages of Partnership:

• Disagreements – the most obvious disadvantages of partnership is the danger of disagreements between the partners. People likely to have difference ideas on how the business should be run. This can be reason of disagreements and disputes which might harm the business and relationship between partners.
• Liability – partnership are subject to unlimited liability, which means that each of the partners share the liability and financial risk of the business.
• Profit sharing – partners share the profit equally. This can lead to inconsistency  where one or more partners are not putting a fair share of effort into the running or management of the business but still taking the benefits.
• Partnership ends on death.