Partnership for Class 1

Definition of Partnership

A formal agreement between two or more persons who agree to be co-owners, divide up the duties of running a company and split the profits or losses the company makes is known as a partnership.

Types of Partnership

General partnership- To operate a firm, a general partnership consists of two or more proprietors. Each partner in this partnership has an equal right to represent the company. All partners have the ability to engage in management functions, make decisions, and have the power to administer the company. Profits, obligations, and liabilities are distributed and shared equitably similarly.

Limited Partnership- This partnership involves both general and limited partners, where the general partner assumes unlimited liability and is responsible for managing the business and overseeing the other limited partners. On the other hand, limited partners have a limited role in the company's operations and control, are restricted only to their investment, and are not involved in the day-to-day activities of the business.

Partnerships offer several benefits:

1. Easy Formation: Partnerships can be established through a simple oral or written agreement between partners, making it easy to form.

2. Increased Resources: Partnerships benefit from increased resources as partners can contribute additional capital and other resources as necessary to support the growth and development of the firm.

3. Flexibility: Partnerships are flexible, allowing partners to initiate changes as needed to achieve desired results or adapt to changing circumstances.

4. Sharing of Risk: Partnerships allow for the sharing of risk, with any losses incurred by the firm distributed equally among all partners.

5. Diverse Expertise: Partnerships benefit from a diverse set of skills, experiences, and talents among the different partners, providing the firm with a broad range of expertise.