The partnership
HELLO, EVERYONE. How are you all doing? Fine, I hope. Last week I left you with the task of identifying the disadvantages of the sole trader. How many did you identify? Well, below I have listed some of the main ones for you. Compare them with what you have. Also, you may find it useful to do some reading on the words and phrases that are new to you.
DISADVANTAGES OF THE SOLE TRADER
1. Nobody to consult in making decisions.
2. Lack of continuity.
3. Unlimited liability.
4. Limited expansion of the business because of lack of capital and low profits.
5. Responsible for finding all the capital.
6. Long working hours with little or no vacation.
7. Has to bear all the risks and losses on his own shoulders.
8. Owner often lacks managerial skills, technology and specialised staff.
Now, in order to eliminate many of the disadvantages of the sole trader, many such businesses have been turned into partnerships.
THE PARTNERSHIP
Partnerships consist of two to 20 part-owners engaged in business with a view to making a profit. Examples of partnerships can be found among many professionals such as lawyers, doctors, dentists, accountants, stockbrokers and jobbers, etc.
CHARACTERISTICS OF PARTNERSHIPS
1. Partners usually run their businesses based on what is written in their Partnership Deed. In the absence of this deed, partners make reference to the British Partnership Act of 1890. This act states (among other things) that profits and losses should be shared equally.
2. Agreement on the conduct of the business is usually by unanimous vote.
3. Such businesses should be registered with the Companies Office of Jamaica who will require information on the business such as its name, type of business, name and other occupation (if they have another occupation) of the partners, etc.
4. Partners will either share the management functions, agree that one partner should serve as manager, or they will employ a manager.
5. When a partner leaves or dies, the partnership is dissolved.
6. There are four basic types of partners: ordinary partners (active or general partners), sleeping (dormant) partners, limited liability partners, and unlimited liability partners. There must be at least one ordinary partner in limited partnerships. Limited partners do not take part in management of the partnership.
LEGAL ASPECTS OF PARTNERSHIPS
1.They normally have partnership deeds. These are often drawn up by a lawyer.
2.The business should be registered with the Companies Office of Jamaica.
ADVANTAGES OF PARTNERSHIPS
1. More capital is usually raised than in the sole-trader type of business.
2. Partnerships are fairly easily formed and start-up costs are low.
3. The business benefits from varied ideas and abilities of partners.
4. Specialisation among managers increases output.
5. The partnership is a more efficient and more controlled business than the sole trader.
6. Workload can be shared. This allows partners to be able to take holidays.
7. There is limited government interference.
8. Partners maintain close contact with employees and customers.
Now, your task is to research and list the disadvantages of partnerships. When you have completed that, you can do some reading on limited companies. Look at private limited companies first, and then at public limited companies. Next week’s lesson will begin with the disadvantages of the partnership and then move to co-operatives.
As we complete our look at each form of business, you should also try to compare and contrast them. Bye for now. I hope your week will be fruitful.