PartnershipSection 8 Objective 1 & 2

Define a partnership businessState the features of a partnership

Partnership • is a– Business organisation owned by two or more persons called

partners for the purpose of making a profit– Potential business persons choose to form a partnership

company– They choose to do so rather than forming a sole trading company

or corporation because• The skills and the experience of partners are combined• It is easier to form• Decision making is easier• of the freedom from observing government regulations and restrictions

Partnership • Features of a partnership company -Voluntary association• Where– Two or more persons coming to together to form a

partnership company voluntarily and not by force (agreement can be made by a handshake)

– They continue in the business as long as they like and leaves the company freely

Partnership • Features of a partnership company – Voluntary association

Partnership• Features of a partnership company – mutual agency• Where– Each partner can act or do business on behalf of the

partnership company– The business conducted by any partner on behalf of the

company is binding (that is all partners are bound into the contract)

Partnership• Features of a partnership – mutual agency

Partnership• Features of a partnership – unlimited liability• Where– Each partner is personally and individually liable for all

partnership liabilities– Creditors first use the partnership assets to settle claims– If the partnership assets are insufficient, they will seek

settlement of claims from any of the partners personal resources

Partnership • Features of a partnership – unlimited liability

Partnership • Features of a partnership – limited life• Where• A partnership company may end voluntarily at any time for

example wheno a new partner is admittedo a partner withdraws• It may also end involuntarily byo The death of a partnero Incapacity of a partner

Partnership • Features of a partnership – limited life

Partnership • Features of a partnership – Co-ownership of property• Where– Partnership assets are owned jointly by the partners of a

company– If for some reason the partnership company has to close

down, each partner has claim on the total assets equal to the balance on his or her respective capital accounts

Partnership • Features of a partnership – Co-ownership of property

Partnership

Partnership