How Good or Bad Is It to Start a Business With Partnership

How Good or Bad Is It to Start a Business With Partnership

In business, where there are two or more owners of the enterprise. Most partnerships have between two and twenty members or maybe more in some situations, though there are examples like the major accountancy firms where there are hundreds of partners. A partner is normally set up using a deed of partnership, This contains:-

  1. The amount of capital each partner should provide. ( This is a major one)
  2. How to profit or losses should be divided.
  3. Rules on how to take on new partners or new projects. 
  4. How the partnership is brought to an end, or how a partner leaves. (Related paper works)

In business, there are two types of partners:-

1. Active partners:- Active partners are those who take part actively in the management of the business enterprise, and you can simply say who has a focus on work to achieve business success.

2. Sleeping Partners:- Most of us know about it, Sleeping partners are those who do not take any part in the conduct of the business. Who just has a focus on their profit only. Both active and sleeping partners are responsible for the debts of the partnership.

Now we are discussing types of Partnership:- Generally, there are two types of partnership

1. General Partnership:- In a general partnership, each partner has full agency powers and may bind the partnership by any act. This means each partner may act as though he is an individual proprietor. A general partnership differs from single ownership in that the actions of any partner not only affect himself but they affect other partners also. A general partnership does very well in law firms, retail trade organizations, medical clinics, small engineering firms, etc. The major disadvantage of this type of partnership is that Each partner has unlimited liability in case of the dissolution of the firm. All partners suffer because of the wrong steps taken by one partner (It mostly happens).

2. Limited Partnerships:- Limited partnership is an association of one or more general partners who manage the business and one or more limited partners whose liability is limited to the capital that they have invested in the business. They share the profit but they do not participate with the control or management of the firm. A major disadvantage of this type of partnership is that the limited partner, though he invests in the business but has no voice in the management. But also it is easy and less costly to form.

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