Question

What are 5 characteristics of a partnership? Be detailed in your descriptions of each characteristic. Provide examples when appropriate. Also, as part of your descriptions, identify how each characteristic makes a partnership different from a sole proprietorship. Include at least one internet reference

Answer 1

Characteristics of partnership

Following are the characteristics of partnership and also explains how they different from sole proprietorship.

​1.Number of persons

There must be at least two persons in a partnership. The maximum number of persons in a partnership should not exceed 100.
Sole proprietorship is a business model where an individual is an owner as well as the operator of the business.

2.Sharing of profit and loss

Profits and losses are shared in the agreed ratio. In the absence of any agreement for profit sharing the business profits or losses are divided equally among all the partners. There is only one owner in sole proprietorship and there is no need to share profit to others.

3.Mutual Agency

The partnership is undertaken by all the partners or any of the partners who acts on behalf of all the partners. Every partner is a principal as well as an agent. Each partner is liable for acts performed by other partners on behalf of the firm.

In sole proprietorship, proprietor is the owner as well as the operator of the business.

4.Unlimited liability
Members of a partnership have unlimited liability. All partners are collectively and individually liable for the firm’s debts and obligations. In case business assets are not adequate to repay liabilities of the firm personal property of partners can be claimed by the creditors.
In the case of sole proprietorship liabilities are rests with the proprietor only, in partnership it can be shared with other partners.

5.Transfer of interest
Partners can transfer his share of interest only with prior consent of all other partners. In partnership, decisions are mutually accepted by all other partners.in the case sole proprietorship decision making rests with the proprietor only and full freedom to operate.