THE PARTNERSHIP BUSINESS ORGANIZATION Definition: A partnership may be defined type of business organization in which two to twenty persons agree legally to set up manage a business outfit with the sole aim of Bringing profit.
HOW TO ESTABLISH A PARTNERSHIP BUSINESS ORGANIZATION
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 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 in Nigeria are Gani Fawehinmi and Co. (law chamber), Diya Fatimilehin and Co. (estate firm).
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 profit.
- Source of capital: The capital required to set up the business is provided by the partners based on 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: The 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 proportional as major sources of capital.
- Loans and overdraft: Partnership business can easily obtain loans and overdraft from the banks since they are jointly liable.
- Trade credit: Money can be obtained from middlemen in advance in order to facilitate production of goods.
- Undistributed profit: Retained profit can be pumped back to 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
Limited partnership 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 equal part in 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 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 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 active part in the administration and management of the business.
The main features of 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.
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