<

Economics FROM 4 ART

CHAPTER 3 :BUSINESS UNIT(ORGANISATION)

PARTNERSHIP

Partnership is a business association with 2 or more formed to own and manange a business capital with the purpose of making profit. The number of partners ranges from 2-20 professions like accountancy,medicine are some examples.

            Members are called partners and share the profit and the risk of the business.

TYPES OF PARTNERSHIP

Sleeping Partnership

Active/ordinary Parnership.

ADVANTAGES OF PARNERSHIP

  • Capital for investment : A partnership has more capital for investment because more persons are involved.
  • Better management : Partners are better managed because skills are combined.
  • Privacy : Partners are not legally compelled to publish their annual account.
  • Prospect Continuity : The death of a partner may not end the Business.
  • Joint decision making : Better results are derived when 2 or more partners put their heads together.
  • Sharing of Risks : Risk is shared among the members thus reducing the individual burdern.
  • Legal Formalities : No measure legal procedure of establishment is required unlike in a joint stock community.
  • Limited Liability : The liability of a limited partner is limited to the capital contributed by the partner.

DISADVANTAGES OF PARTNERSHIP

  • Unlimited Liability : The partner’s properties are not secured or protected from the payment of the debt of the company. Payment of the debts of the company can extend to the private properties of partners in case of Bank rupture
  • Insufficent Capital : The partners are unable to raise enough capital because partners cannot invite members of the public.
  • Slow decision Making : This is due to the fact that partners must take part in the decision making process or must be consulted before a decision is taken.
  • Personal Differences: Disagreement between parners are possible and can always create a problem in the running of the business. The partners need to trust each other, otherwise, management becomes difficult.

SOURCES OF FINANCE TO PARTNERSHIP

  • Contribution from partners.
  • Banks loans either in the form of normal loans or over.
  • Higher purchase
  • Trade credit
  • Grants and gift from the government
  • Plough backs or retained profit or reinvested profit
  • Contribution from admission of new partners
  • Loans from credit union
  • Assistance from NGO’s
  • The use of depreciation funds.
par Claude Foumtum