Partnership

Features of Partnership:

• There are two or more than two owners in a partnership firm.
• There is unlimited liability for each partner.
• Partnership ends on death or withdrawal of any partner.
• There is a restriction on transfer of shares.
• Partnership is formed by an oral or written agreement between the partners.

Advantages of partnership:

• Capital: The advantages of the partnership in business is they can pay the initial capital required to start up the business. This means that the more the partners are the more money is invested in business which in turns means more chances of profit in the future which obviously will be shared equally among the partners.

• Flexibility: Partnership is more flexible than companies in terms of management and they are less strictly bound by laws which refer to their formation hence they are easier to form. They are also the sole investors who run the company and stake holders cant interfere in their business

• Shared responsibility: Partners have the freedom to choose their responsibilities according to their skill set rather than sharing each task of management equally among the partners. This yields the most profit. So the partner that is best with numbers may take the accounting positions of the business while the other who is  good with sales may take the leading salesman position in the business.

Disadvantages of partnership:

• Disagreement: The main disadvantage of partnership is the possibility of disagreements between the partners as not all humans have same ideas and goals so the difference in opinions can lead to disagreements and in worst case scenario the dissolving of the business. That is why it is strongly advised to create a deed before starting a business stating the terms in case there is a disagreement and also the repercussions in case the partnership is abolished.

•   Profit Sharing: As their is an advantage in partnership that everyone shares the profit equally but there is also a drawback of this sharing as some of the partners may not put in the same efforts as the rest and may be earning profits by not even putting in any effort.

• Agreement: In  partnership it is a must that all partners should agree on the same point. So in some cases there is less freedom with respect to management.