THE PARTNERSHIP BUSINESS ORGANIZATION Definition: A partnership may be a defined type of business organization in which two to twenty persons agree legally to set up and manage a business outfit with the sole aim of Bringing profit.
HOW TO ESTABLISH A PARTNERSHIP BUSINESS ORGANIZATION
The partnership is usually formed by an association of two to twenty persons, who by lent (usually legal) decide to pool their resources (capital) or skill or both together and establish a business enterprise.
The people involved in a partnership agreement are called partners and they share the profit, losses and of the business. When partners are red in banking enterprise, the number required by law is between two and ten.
Some examples of partnership business in Nigeria are Gani Fawehinmi and Co. (law chamber), and Diya Fatimilehin and Co. (estate firm). Dangote Group of companies
FEATURES OR CHARACTERISTICS OF PARTNERSHIP ORGANIZATION
Ownership: The partnership is owned by two to twenty persons but in a banking enterprise it is between two and ten.
Objective: The main objective of the partnership is to make a profit.
Source of capital: The capital required to set up the business is provided by the partners based on a legal agreement.
Liability: The partners have unlimited liability. you can read my article on rights of partners here
Life span: The life span of the partnership depends on the agreement signed by the partners involved.
Legal entity: It is not a legal entity as the partners are not separated from the business.
Management: A partnership business is controlled and managed by the partners.
SOURCES OF CAPITAL FOR PARTNERSHIP BUSINESS
- Personal contributions from partners: The partners can jointly agree to contribute their money either equally or proportionally as major sources of capital.
Loans and overdrafts: A Partnership business can easily obtain loans and overdraft from the banks since they are jointly liable.
Undistributed profit: Retained profit can be pumped back into the business to aid its expansion.
Admission of new partners: Upon the admission of new partners, more capital will be brought into the business.
TYPES OF PARTNERSHIP BUSINESS ORGANIZATION
- Limited partnership
A limited partnership business is a type of partnership which is formed and registered under the Limited Partnership Act. In a limited partnership, there must be one general partner with unlimited liability and one limited partner whose liability is limited to the amount invested.
The partners cannot take an equal part in the management and administration of the business. The limited partner can have access to the account of the partnership. for types of partners read here
The main features of a limited partnership
A limited partner cannot participate in the management of the business.
Liability is limited but there must be a partner with unlimited liability.
It must be registered.
General or ordinary partnership
In a general partnership, partners have equal responsibility and risk in the business. All partners are agents of the firm and they all share the responsibility of running the business. Hence, they are liable to the full extent of the debts of the firm. The liability of members is unlimited; they all take an active part in the administration and management of the business.
The main features of a general partnership
(i) All the partners have unlimited liability.
- Partners are agents of the enterprise.
- They have equal responsibility in management.
- They have equal power in binding the contract.
general benefits of a partnership business
Partnership businesses offer several benefits that make them an attractive option for entrepreneurs. Here are some general benefits of a partnership business:
Shared responsibility and workload: In a partnership, the business\’s responsibilities and workload are shared among the partners. This can help alleviate the burden of running a business alone and provide a better work-life balance.
Complementary skills and expertise: Partnerships often bring together individuals with different skill sets and areas of expertise. This diversity can enhance the overall capabilities of the business, leading to better decision-making and problem-solving.
Access to more resources: With multiple partners, there is a potential for increased financial resources, as each partner can contribute capital to the business. This can enable the partnership to invest in growth opportunities, expand operations, or undertake larger projects.
Shared financial risk: Since the partners pool their financial resources, the risk associated with the business is shared among them. This can provide a greater sense of security compared to being solely responsible for the financial obligations of the business.
Flexibility in management and decision-making: Partnerships typically allow for a more flexible management structure compared to corporations or other business entities. Partners can make decisions collectively, taking into account the opinions and perspectives of all partners involved.
limited liability companies