ECONOMICS

A partnership is a business that is owned by two or more people by not more than 20. The people interested in forming a partnership draw up a written agreement or deed. The agreement contains;

  • The type of business they want to run

  • The amount of money to be contributed by each person

  • How profit is to be shared.

  • What should be done when a partner dies

  • The ways in which a partnership may be wound up

  • How new partnership are to be admitted

However, partnership is not required by law to be registered. It can only be registered if it is formed as a limited partnership.

Advantages

  • Larger capital

  • Specialization among partnership

  • Wiser decisions

  • Personal knowledge of customers

  • Privacy

Disadvantages

  1. Distrust and quarells

  2. Collective responsibility

  3. Death

  4. Unlimited liability

How sole proprietor and partnership raise capital

  • By personal savings

  • Loans from friends and relations

  • Loans and overdraft from banks

Types of partnership

a) Limited partnership: This is a type of partnership that is formed and registered under the Limited Partnership Act.

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.

b) General or ordinary partnership

In general partnership, partners have equal responsibility and risk in the business.

Main Features of General Partnership

  1. All the partners have unlimited liability.

  2. Partners are agents of the enterprise

  3. They have equal responsibility in management

  4. They have equal power in binding the contract.