Question

1.How organize the business as a partnership? What advantages does the partnership form of Organization offer the business? What are the disadvantages of the partnership form of organization?

2.In the business a general partnership or limited partnership?

3.Do the partners have a written partnership agreement? What type of the agreement commonly used?

Answer 1

Dear student, you have submitted three questions, I am answering the first one.

Solution:

1.

Organisation of business as partnership:

a. Two or more persons can come together to carry business and enter into a contract of partnership.

b. The persons who enter into this contract are called partners.

c. The contract they made is called a partnership deed.

d. All the partners contribute the amount to purchase business assets and this amount is recorded as partners capital in books of accounts.

e. partners share profit either in their capital ratio or in agreed profit sharing ratio.

f. The partnership deed contains the terms of partnership, the contribution of capital by partners and their agreed profit sharing ratio.

2.

Advantages of partnership organisation of business.

a. easy formation:

partnership firm can be easily formed . the formation process is not at all complex.

b. Large resources.

in partnership form of organisation all partners contribute capital amount and thus business can have advantage of larger resources in comparison of a sole proprietorship business.

c. sharing of risk :

In partnership , profit and loss shared in an agreed ratio and in this way the risk of business is also shared.

d. Better operation and Management:

There are limited number of partners in partnership business,

And that's why the partnership offers better management and operation of business in comparison to the operations and management of company .

3. Disadvantages of partnership form of organisation:

a. Limited capital:

In a partnership firm, few people enter as partners,

thus in partnership there are chances of Limited capital in comparison of joint stock companies , where larger number of people can become shareholders.

b. unlimited liability:

in a partnership firm, partners bear the unlimited liability in case of liquidation of partnership busniess ,

and this is a disadvantage in comparison to a company form of organisation where every member have only limited liability.

C. chances of dispute:

As in a partnership there are number of partners involved , sharing profit and losses ,

there are more chances of disputes among the partners , which may result in disruption in the operation of business.

d. uncertain existence:

There is an uncertainty on existence of partnership firm,

In case any or all the partners become insolvent , the business may get disrupt aur even go into liquidation.

Whereas in company form of organization , even if sum of the members go insolvent , it does not affect the organisation and the business keep continue its operations.

Finish.