Question

write a conclusion about a partnership business

-the advantages of doing a partnership company

-how's the management of the company run

Answer 1

A partnership business is one in which two or more individuals ( each known as a partner) join together, to provide products and/or services under a common brand name. They set up a firm to provide such products or services.

A partnership firm is not a different entity than the partners who form it. Each and every partner is responsible for the profit and loss of the firm in the sharing ratio decided by them at the time of setup of a partnership. A partnership is generally depicted by a written deed which contains all the rules and regulations applicable to that firm in regards to the business they can carry, the profit-sharing ratio, the salary each partner is entitled to,

The partnership has advantages in the following ways:

1) A partnership deed allows paying salary to its partners which are also tax-deductible for income tax purposes.

2) The partnership allows the partners to withdraw funds from the firm at no extra cost (i.e. dividend distribution tax in case of a public/private company). This helps the partners a greater share of return of equity as compared to that of a company.

In a company even after paying for taxes on Net income before taxes, it has to pay dividend distribution tax if it wants to distribute free cash it holds on its balance sheet to its shareholders.

3) The firm requires less compliance with laws as compared to that of a company. A company is required to file many returns with the Registrar of companies every time an event has taken place to keep its shareholders informed about it. So, the compliance cost is low in case of a partnership firm when compared to that of a company.

4) The firm is not required to pass a resolution each time it wants to raise funds, alter the partnership deed and enter into new ventures. This is because a company can have many shareholders but a firm can have a limited number of partners. Each time a company wants to do new business or raise funds from public or banks or any financial institution it needs to take approval from the majority of the shareholders, which is not in case of a partnership firm.

The answer to the next question regarding a company:

- Company is owned by its shareholders which lack the skills to run the company, so they form management to run the businesses of the company.

- the management has a long hierarchy for the proper functioning of the company. The most common members found in management are chairman, managing director, chief executive officer, chief finance officer, chief operating officer and managers and people working under them.

- Each person handles a specific task regarding the day-to-day functions of a company.

- Chief Executive officer handles the whole operations of the company and he reports to the managing director of the company.

- Chairman of the company is given the task to overlook the governance of the company is properly managed and no harm has been done to shareholder's fund. Each employee of the company has to work according to the management's vision to expand the shareholder's value.

-Officers work according to the actions and vision set by the management.

This is a short gist how a company is run. To learn about it you should read about the biographies of the executives who run large companies of the world.