BSTE_212_SU_LE_3.1-3.5_2025

BSTE 212 Overview

• Course Title: BSTE 212

• Institution: NWU

• Date: 04 March 2025

• Instructor: Mr. M Matos

Study Unit 3: Partnership

• Title: Leereenheid 3 / Vennootskap

Learning Outcomes for Study Unit 3

• Objectives

  • Define the concept of partnership and its components.

  • Explain the characteristics of partnerships.

  • Identify advantages and disadvantages of partnerships.

  • Compare partnerships to other ownership forms.

  • Justify key issues to include in a partnership agreement.

  • Confirm legal requirements for partnerships.

  • Identify situations leading to partnership dissolution.

  • Assess the impact of partnerships on business success or failure.

Study Material

• Title: Introduction to Business Management

• Authors: Erasmus, Rudansky-Kloppers, and Strydom

• Year: 2016, Publisher: Oxford University Press

• Chapter Reference: Chapter 3, pp. 74-75

Section 3.1: The Concept of Partnership

Learning Outcomes

• At the end of this section, you should be able to:

  • Define the term 'partnership' and its elements.

Definition of a Partnership

• Characteristics

  • A contractual relationship between a minimum of two to an unlimited number of partners.

  • Engagement in a legitimate business operation with profit motives.

Detailed Explanation of Partnership Concept

• Partnerships can involve individuals, companies, organizations, and governments.

• Contributors to a partnership are known as "partners" and often share professions.

• The previous limit of 20 partners is void under the Companies Act (No. 71 of 2008), allowing unlimited partnerships.

Types of Partnerships

Ordinary Partnerships

• Composed solely of ordinary partners who are active in managing the business.

• Decisions made on behalf of the partnership by partners are legally binding.

Extraordinary Partnerships

1. Anonymous Partnerships

   • Only certain members' names are used, and silent partners contribute solely financially without participating in management.

2. Commanditarian Partnerships

   • Similar to anonymous partnerships, where silent partners contribute financially but have no management rights and limited liability.

Section 3.2: Characteristics, Advantages, and Disadvantages of Partnerships

Learning Outcomes

• At the end of this section, you should be able to:

  • Identify and describe the characteristics of a partnership.

  • List advantages and disadvantages of a partnership.

Characteristics of Partnerships

• Contributions from each partner.

• No separate legal entity.

• Joint liability among partners.

• Taxation on personal income for each partner.

• Dissolves with the departure or death of a partner unless a new partnership is formed.

Advantages of Partnerships

• Simplicity in formation without formalities.

• Combination of expertise and capital among partners.

• Shared workload and decision-making responsibilities.

• Increased ability to raise funds, such as loans.

Disadvantages of Partnerships

• Profit sharing among more individuals.

• Unlimited liability for general partners.

• Potential for disagreements and conflicts.

• Partnerships can be dissolved upon the death or exit of a partner.

Section 3.3: Comparison with Other Forms of Ownership

Learning Outcomes

• At the end of this section, you should be able to:

  • Compare partnerships with other ownership types.

Comparison Overview

• Evaluation of ownership forms is critical for entrepreneurs to identify which characteristics suit their needs best.

Key Comparisons

Section 3.4: Legal Requirements for Partnerships

Learning Outcomes

• At the end of this section, you should be able to:

  • Confirm legal requirements for a partnership.

  • Justify key issues in the partnership agreement.

Legal Requirements

• Existence of a valid contract (preferably written).

• Minimum of two partners.

• Contribution in capital, services, knowledge, or skills.

• Common interest for profit.

Partnership Agreement Essentials

• A formal agreement binding partners to specific terms.

• Ideally drafted with legal assistance to ensure clarity and compliance.

Section 3.5: Contributions to Success/Failure and Situations for Dissolution

Learning Outcomes

• At the end of this section, you should be able to:

  • Identify dissolution situations.

  • Assess how a partnership affects a business's success or failure.

Potential for Success

• Sufficient capital from partner contributions.

• Expertise brought by each partner enhancing success.

• Fewer legal hurdles can positively affect business.

Risks of Failure

• Negative actions from partners.

• Excessive partners leading to delayed decisions.

• Persistent disagreements among partners.

Situations Leading to Dissolution

• Death or retirement of a partner.

• Inability to settle debts.

• Sequestration of a partner.

• Prolonged illness affecting duties.

Definition of Sequestration

• A legal process where an individual's assets may be declared bankrupt.

• Affects a partner's ability to fulfill obligations, leading creditors to seek declarations of insolvency.

Preparation for Next Unit

• Study Section 4.1 - 4.2 on Close Corporations and Co-operative Societies.

Closing Thought

• "To be successful, you have to have your heart in your business, and your business in your heart." - Thomas Watson Sr.

Acknowledgment

• Thank you. / Baie dankie.