Advantages And Disadvantages Of Partnership In A Business

Decent Essays

Partnership is a type of business organisation in which two or more individuals work in a business. Investment, profits and loss and other resources are equally shared according to the terms and conditions of the partnership agreement. In absence of such agreement, a partnership business is most likely to be a failure. Participants in an enterprise agree to share the associated risks and rewards equally. The Partnership Act 1890 explains that a partnership is the relation which exists between people carrying on a business as usual with an aim of gaining profit. (Alan Griffiths & Stuart Wall, 2008, p133 ) states that "This is a form of business relationship which is usually entered into by individuals who wish to take advantage of the combined …show more content…

One of it is the unlimited liability of the debts. Unlimited liability is meant by a particular business involves joint owners that are equally responsible for debt and liabilities accrued by the business partners are legally responsible for the debts and other liabilities in the business firm (Investopedia,2017). The responsibility applies to their private assets which the partner has. (Business law, p88, 2006) Professional liability could not be claimed by full insurance. A partner is still liable after the partner’s death for the debts incurred by the firm when the partner was a legal partner. If the partner did not notice or inform the retirement in the London Gazette, the partner is still liable for the debts (Business law, p88, 2009). The solution to solve this huge disadvantage is to be a limited partner. The liability of the partner is limited for the debts of the business firm (Limited Partnership Act 1907). However, one partner should be a general partner meaning that, this partner would be fully responsible for the firm's debt. If one partner does a wrongful act or an exclusion in the course of the business, the firm is liable for the wrongful act or the omission by the partner (Partnership Act 1890, section

Get Access