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23. (a) Define the term Partnership as used in Co

23. (a) Define the term Partnership as used in Co

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Question

  1. (a) Define the term Partnership as used in Commerce.
    (02 marks)
    (b) Mention eight Pieces of information contained in a Partnership Deed.(08 marks)
    (c) Two sole traders in your community would wish to form a partnership.
    Advise them on the merits of a partnership form of business over sole proprietorship.
    (10 marks)

Best Answer

(a) Partnership refers to a form of business organization in which two or more individuals come together to carry on a business with a view to making a profit.
(b) Eight pieces of information contained in a partnership deed are:
  1. Name of the partnership
  2. Nature and scope of the business
  3. Duration of the partnership
  4. Capital contribution of each partner
  5. Profit sharing ratio of each partner
  6. Roles and responsibilities of each partner
  7. Provisions for admission and retirement of partners
  8. Dispute resolution mechanism
    © Merits of a partnership form of business over sole proprietorship are:
  9. Shared expertise: In a partnership, each partner brings different skills and expertise to the business, allowing partners to share the workload and responsibilities.
  10. Increased capital: A partnership allows for multiple sources of capital, making it easier to raise funds and invest in the business.
  11. Shared risk: In a partnership, each partner shares the risks and losses of the business, reducing the financial burden on any one individual.
  12. Attracting talent: A partnership can attract talented individuals who may not be interested in a sole proprietorship.
  13. Tax benefits: A partnership may be eligible for tax benefits, such as the ability to deduct business losses from personal income tax.
  14. Flexibility: A partnership can be a flexible form of business organization, allowing for changes and adaptations to the business as needed.
  15. Greater resources: A partnership can have greater resources than a sole proprietorship, allowing for larger and more complex business ventures.
  16. Succession planning: A partnership can have a clear plan for succession in place, allowing for the business to continue even if one partner leaves or retires.