essay on business partnership

Pros and Cons to Starting a Business Partnership

This essay about the pros and cons of a partnership outlines the benefits and drawbacks inherent in this business structure. It highlights the advantages of partnerships, such as the pooling of resources, skills, and networks that enhance the business’s foundation and growth potential. Additionally, it points out the simplicity and operational flexibility that partnerships offer, making them an attractive option for small businesses. However, the essay also addresses the potential downsides, including the risk of conflict between partners and the issue of personal liability for business debts, which can put personal assets at risk. The piece concludes by emphasizing the importance of careful planning, clear communication, and well-defined agreements to mitigate these drawbacks, underlining that a partnership should align with the entrepreneurs’ goals, risk tolerance, and business vision.

How it works

Embarking on an entrepreneurial journey often entails selecting the optimal structure to ensure its expansion and longevity. Amidst the array of choices, partnerships emerge as an enticing option for many visionaries, presenting a fusion of collective responsibility, resources, and expertise. However, akin to any organizational framework, partnerships harbor their own array of merits and demerits. Grasping these intricacies can empower aspiring entrepreneurs to navigate the complexities inherent in establishing and managing a prosperous partnership.

One of the paramount advantages of a partnership lies in the consolidation of resources.

As individuals unite to form a partnership, they amalgamate not merely their financial capital but also their proficiencies, insights, and networks. This synergy can substantially augment the enterprise’s capabilities, furnishing a sturdier footing than what a sole proprietorship might afford. Moreover, the communal financial commitment can facilitate more assertive capital allocation, empowering the enterprise to seize growth prospects more vigorously.

Another notable boon is the simplicity of formation and adaptability of operation. In comparison to corporations, partnerships can be relatively uncomplicated to inaugurate, with fewer formalities and regulatory constraints. This straightforwardness may particularly appeal to small-scale enterprises or those aiming to curtail administrative overheads. Furthermore, partnerships offer adaptability concerning management and decision-making. Partners can tailor their operational modalities, roles, and obligations to align with their proficiencies and business objectives, furnishing a degree of operational flexibility that is often arduous to attain in more rigid organizational setups.

Nevertheless, the corollary of this flexibility is the susceptibility to discord. Given that partnerships entail collaborative decision-making, there exists a potential for discord amongst partners regarding business strategies, financial governance, or operational matters. Such discord, if left unresolved, can impede the enterprise’s advancement and even precipitate its dissolution. Consequently, transparent communication and well-defined agreements are imperative in managing and mitigating the perils of partner disagreements.

Yet another significant drawback of partnerships pertains to liability concerns. In a general partnership, each partner assumes personal liability for the enterprise’s debts and obligations. This implies that in the event of debt accrual or legal proceedings, the personal assets of partners can be leveraged to settle these liabilities. This level of exposure can be daunting and constitutes a substantial factor for individuals contemplating entry into a partnership. Although limited partnerships and limited liability partnerships proffer frameworks to alleviate this risk, they entail their own intricacies and prerequisites.

In summation, partnerships can furnish a feasible and appealing organizational structure for those seeking to harness collective resources, insights, and networks. The simplicity of formation and operational versatility constitute notable advantages, particularly for nascent enterprises and startups. Nonetheless, the potential for internal discord and the risks associated with personal liability are pivotal considerations necessitating meticulous planning, lucid agreements, and occasionally, legal safeguards. As with any entrepreneurial decision, the decision to engage in a partnership should be made with a comprehensive comprehension of its pros and cons, ensuring alignment with the entrepreneurs’ objectives, risk tolerance, and vision for their enterprise.

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What Is a Partnership?

• Advantages and Disadvantages

Partnerships by Country

• Partnership FAQs

The Bottom Line

• Types of Corporations

Partnership: Definition, How It Works, Taxation, and Types

Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.

A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits.

There are several types of partnership arrangements. In particular, in a partnership business, all partners share liabilities and profits equally, while in others, partners may have limited liability . There also is the so-called "silent partner," in which one party is not involved in the day-to-day operations of the business.

Key Takeaways

• A partnership is an arrangement between two or more people to oversee business operations and share its profits and liabilities.
• In a general partnership company, all members share both profits and liabilities.
• Professionals like doctors and lawyers often form a limited liability partnership.
• There may be tax benefits to a partnership compared to a corporation.

Investopedia / Matthew Collins

Types of Partnerships

In a broad sense, a partnership can be any endeavor undertaken jointly by multiple parties. The parties may be governments, nonprofits enterprises, businesses, or private individuals. The goals of a partnership also vary widely.

Within the narrow sense of a for-profit venture undertaken by two or more individuals, there are three main categories of partnership: general partnership , limited partnership, and limited liability partnership.

General Partnership

In a general partnership, all parties share legal and financial liability equally. The individuals are personally responsible for the debts the partnership takes on. Profits are also shared equally. The specifics of profit sharing will almost certainly be laid out in writing in a partnership agreement.

When drafting a partnership agreement, an expulsion clause should be included, detailing what events are grounds for expelling a partner.

Limited Liability Partnership

Limited liability partnerships (LLPs) are a common structure for professionals, such as accountants, lawyers, and architects. This arrangement limits partners' personal liability so that, for example, if one partner is sued for malpractice, the assets of other partners are not at risk.

Some law and accounting firms make a further distinction between equity partners and salaried partners. The latter is more senior than associates but does not have an ownership stake. They are generally paid bonuses based on the firm's profits.

Limited Partnership

Limited partnerships are a hybrid of general partnerships and limited liability partnerships. At least one partner must be a general partner, with full personal liability for the partnership's debts. At least one other is a silent partner whose liability is limited to the amount invested. This silent partner generally does not participate in the management or day-to-day operation of the partnership.

Finally, the awkwardly-named limited liability limited partnership is a new and relatively uncommon variety. This is a limited partnership that provides a greater shield from liability for its general partners.

Taxes and Partnerships

There is no federal statute defining partnerships, but nevertheless, the Internal Revenue Code (Chapter 1, Subchapter K) includes detailed rules on their federal tax treatment.

Partnerships do not pay income tax. The tax responsibility passes through to the partners, who are not considered employees for tax purposes.

Individuals in partnerships may receive more favorable tax treatment than if they founded a corporation. That is, corporate profits are taxed, as are the dividends paid to owners or shareholders. Partnerships' profits, on the other hand, are not double-taxed in this way.

Advantages and Disadvantages of Partnerships

A successful partnership can help a business thrive by allowing partners to pool their resources and labor. Most sole proprietors do not have the time or resources to run a successful business alone, and the startup stage can be the most time-consuming.

Creating a partnership allows the partners to benefit from one another's labor, time, and expertise. Moreover, a shrewd partner can also provide additional perspectives and insights that can help the business grow.

But there is also an additional risk in joining a partnership. In addition to sharing profits, the partners may also assume responsibility for any losses or debts from the other partners. There is also a higher chance of conflict or mismanagement. When the time comes to exit, it may be harder to reach an agreement about selling the business.

Pros and Cons of Partnership

Partners can pool their labor, capital and expertise.

Partners can share tasks, allowing greater work-life balance.

More partners can bring their experience and new perspectives to the firm.

Partners may bring additional debts or liabilities.

There is a greater chance of disagreement or mismanagement.

It may become harder to sell the business.

The basic varieties of partnerships can be found throughout common law jurisdictions, such as the United States, the U.K., and the Commonwealth nations. There are, however, differences in the laws governing them in each jurisdiction.

The U.S. has no federal statute that defines the various forms of partnership. However, every state except Louisiana has adopted one form or another of the Uniform Partnership Act ; so, the laws are similar from state to state. The standard version of the act defines the partnership as a separate legal entity from its partners, which is a departure from the previous legal treatment of partnerships.

Other common law jurisdictions, including England, do not consider partnerships to be independent legal entities.

How Does a Partnership Differ From Other Forms of Business Organization?

A partnership is a way of structuring a business that involves two or more individuals (the partners). It involves a contractual agreement (the partnership agreement) between all of the partners that set the terms and conditions of their business relationship, including the distribution of ownership, responsibilities, and profits and losses. Partnerships outline and clearly define a business relationship and responsibility.

Unlike LLCs or corporations, however, partners are personally held liable for any business debts of the partnership, which means that creditors or other claimants can go after the partners' personal assets.  Because of this, individuals who wish to form a partnership should be extremely selective when choosing partners.

If Partners Don't Have Limited Liability Why Set Up a Partnership?

Partnerships have several benefits. They are often easier to set up than LLCs or corporations and do not involve a formal incorporation process through a government. This has the added benefit of not being subject to the same rules and regulations that apply to corporations and LLCs. Partnerships also tend to be more tax-friendly.

What About Limited Partnerships?

In limited partnerships (LPs), there are general partners who maintain operations of the firm and have full liability, whereas limited (silent) partners, who are often passive investors or otherwise not involved in day-to-day operations, enjoy limited liability. A limited liability partnership (LLP) is different from an LP.  In an LLP, partners are not exempt from liability for the debts of the partnership, but they may be exempt from liability for the actions of other partners. A limited liability limited partnership (LLLP) is a relatively new business form that combines aspects of LPs and LLPs.

Do Partnerships Pay Taxes?

The partnership itself does not pay business taxes. Instead, taxes are passed through to the individual partners to file on their own tax returns, often via a Schedule K .

What Types of Businesses Are Best-Suited for Partnerships?

Partnerships are often best for a group of professionals in the same line of work where each partner has an active role in running the business. These often include medical professionals, lawyers, accountants, consultants, finance & investing, and architects.

A partnership is a legal arrangement that allows two or more people to share responsibility for a business. Those partners share the ownership and profits, but they also share the work, responsibility, and potential losses. A successful partnership can give a new business more opportunities to succeed, but a poorly-thought out one can cause mismanagement and disagreements.

U.S. Small Business Administration. " Choose a Business Structure ."

Utah Department of Commerce. " Limited Liability Limited Partnerships ."

U.S. Congress. " U.S. Code, Section 26, Subtitle A, Chapter 1, Subchapter K: Partners and Partnerships ."

Uniform Law Commission. " Partnership Act ."

National Conference of Commissioners on Uniform State Laws. " Uniform Partnership Act (1997) ," Page 91.

Thompson Reuters Practical Law. " Partnership ."

Internal Revenue Service. " Tax Information for Partnerships ."

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What Is a Business Partnership?

• How It Works

Partnership vs. LLC

Forming a partnership, creating a partnership agreement, joining an existing partnership.

• How Partners are Paid

How Partners Pay Income Tax

The Balance / Daniel Fishel

Key Takeaways

• A partnership consists of two or more persons or entities doing business together.
• There are three main types of partnership: general, limited, and limited liability.
• Partnerships must file with the state in which they do business and are governed mostly by state laws.
• Each partner invests in the business and shares in its profits and losses.
• Partners may or may not be liable for the actions taken by the company.

A business partnership is a way of organizing a company that is owned and sometimes run by two or more people or entities. The partners share in the profits or losses.

Before you establish a business partnership, you should investigate the various types of partnerships that are available and how each of them works.

A business partnership is a legal relationship that is most often formed by a written agreement between two or more individuals or companies. The partners invest their money in the business, and each partner benefits from any profits and sustains part of any losses.

The partnership as a business often must register with all states where it does business . Each state may have several different kinds of partnerships that you can form, so it's important to know the possibilities before you register.

How Does a Partnership Work?

Some partnerships include individuals who work in the business, while other partnerships may include partners who have limited participation and also limited liability for the business's debts and any lawsuits filed against it.   

A partnership, as opposed to a corporation , is not a separate entity from the individual owners. A partnership is similar to a sole proprietor or independent contractor business because with both of those types of businesses, the business isn't separate from the owners for liability purposes.

Income tax is not paid by the partnership itself. After profits or losses are divided among the partners, each partner pays income tax on their individual tax return.

Types of Partnerships

Before you start a partnership, you will need to decide what type of partnership you want. There are three different kinds that are commonly set up.

• A general partnership (GP) consists of partners who participate in the day-to-day operations of the partnership and who have liability as owners for debts and lawsuits.
• A limited partnership (LP) has one or more general partners who manage the business and retain liability for its decisions and one or more limited partners who don't participate in the operations of the business and who don't have liability.
• A limited liability partnership (LLP) extends legal protection from liability to all partners, including general partners.  An LLP is often formed by partners in the same professional category, such as accountants, architects, and lawyers. The partnership protects partners from liability from the actions of other partners.

Types of Partners in a Partnership

Partners may be individuals, groups of individuals, companies, and corporations. Depending on the type of partnership and the levels of partnership hierarchy, a partnership can have different types of partners . 

• General partners and limited partners: General partners participate in managing the partnership and often have liability for partnership debts and obligations. Limited partners invest but do not participate in management.
• Different levels of partners: For example, there may be junior and senior partners. These partnership types may have different duties, responsibilities, and levels of input and investment requirements. 

A limited liability company (LLC) with two or more members (owners) is treated as a partnership for income tax purposes. The main difference between an LLC and a partnership is that in an LLC, members are generally shielded from personal liability for the company. In many partnerships, only limited partners are protected from personal liability for the company.

Partnerships are usually registered with the state or states in which they do business, but the requirement to register and the types of partnerships available vary from state to state. Partnerships use a partnership agreement  to clarify the relationship between the partners; what contributions, including cash, they will make to the partnership; the roles and responsibilities of the partners; and each partner's distributive share in profits and losses.  This agreement is often just between the partners; it's not generally registered with a state.

Check with your state's secretary of state to determine the requirements for registering your partnership in your state. Some states allow different types of partnerships and partners within those partnerships.

A strong partnership agreement addresses how decision-making power will be allocated and how disputes will be resolved. It should answer all the "what if" questions about what happens in a number of typical situations. For example, it should spell out what happens when a partner wants to leave the partnership. State law will apply if there is nothing in the partnership agreement that lays out how to handle the separation—or any other issue that arises.  

A partnership agreement is best created with the help of an experienced attorney.

An individual can join a partnership at the beginning or after the partnership has been operating. The incoming partner must invest in the partnership, bringing capital (usually money) into the business and creating a capital account . The amount of the investment and other factors, like the amount of liability the partner is willing to take on, determine the new partner's investment and share of the profits (and losses) of the business each year.  

How Partners Are Paid

Partners are owners, not employees, so they don't generally get a regular paycheck. Each partner receives a distributive share  of the profits and losses of the business each year. Payments are made based on the partnership agreement, and the partners are taxed individually on these payments.

In addition, some partners may receive a guaranteed payment which isn't tied to their partnership share. This payment is usually for services like management duties.

The partnership's income tax is passed through to the partners, and the partnership files an  information return   (Form 1065)  with the IRS.   Individual partners pay income taxes on their share of the profit or loss of the partnership. The partners receive a Schedule K-1 showing their tax liability from the business for the year. The Schedule K-1 is included with the partner's other income on their personal tax return (Form 1040 or Form 1040-SR).  

General partners must pay self-employment (SE) taxes (Social Security and Medicare taxes) on their share of partnership earnings. Limited partners must pay SE taxes only on guaranteed payments.

U.S. Small Business Administration. " Business Structures — Partnerships ."

Washington State Department of Revenue. " Choose an Ownership Structure ."

Internal Revenue Service. " Partnerships ."

North Dakota Secretary of State. " General Partnership ."

North Dakota Secretary of State. " Limited Partnership ."

Cornell Law School Legal Information Institute. " Limited Liability Partnership (LLP) ."

California Secretary of State. " Limited Liability Partnership (LLP) ."

U.S. Small Business Association. " Choose a Business Structure ."

Cornell Law School Legal Information Institute. " Partnership ."

Cornell Law School Legal Information Institute. " Limited Partnership ."

Internal Revenue Service. " Limited Liability Company (LLC) ."

Accion. " Keys to a Solid Partnership Agreement ."

Internal Revenue Service. " Publication 541(Rev. February 2019): Partnerships ," Page 7.

Internal Revenue Service. " Frequently Asked Questions: Are Partners Considered Employees of a Partnership or Are They Considered Self-Employed? "

Home — Essay Samples — Business — Company — Different Types Of Partnership

Different Types of Partnership

• Categories: Agreement Company

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Words: 701 |

Published: Dec 18, 2018

Words: 701 | Pages: 2 | 4 min read

• Capital – If there are more number of partners they can invest more capital to the business.
• Flexible – Partnership businesses are easier to form and easier to run. Owners can decide the way that how the business should run.
• Easy to make Decisions – Partners can easily take decisions according to the situation of the business.
• Limited external regulations - When compared to the other types of businesses partnerships has less regulations.
• Responsibility is shared – Partners can share the responsibilities among them. It will allow to partners to make their abilities better.
• Disagreements – There can be disagreements between partners. It will be adisadvantage when making decisions.
• Unlimited liability – Partners are subjects to unlimited liability which means each partners shares liability and all the risks including financial risks of the business.
• Taxation – This is one of a major disadvantage of partnerships. Partners must pay tax each year.
• Profits should be shared – All the earned profits should equally share among partners.
• Limited liability for shareholders – As earlier mentioned the shareholders are liable only for their invested money.
• Tax advantage and tax – These limited companies are only taxed on their profits.
• Great Security – The limited Companies are totally separate from the directors and shareholders. Because of that their personal assets are not at any risk.
• Respect – Setting up a “Limited “company it gives the directors an air of respect.
• Pensions – Limited companies can fund their employees a legitimate expense.
• Cost is high – Limited companies are expensive to establish.
• Financial status are public – Company accounts and records are can be accessed by any person

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Improving the management of complex business partnerships

Partnerships never go out of style. Companies regularly seek partners with complementary capabilities to gain access to new markets and channels, share intellectual property or infrastructure, or reduce risk. The more complex the business environment becomes—for instance, as new technologies emerge or as innovation cycles get faster—the more such relationships make sense. And the better companies get at managing individual relationships, the more likely it is that they will become “partners of choice” and able to build entire portfolios of practical and value-creating partnerships.

Of course, the perennial problems associated with managing business partnerships don’t go away either—particularly as companies increasingly strike relationships with partners in different sectors and geographies. The last time we polled executives on their perceived risks for strategic partnerships, 1 Observations collected in McKinsey’s 2015 survey of more than 1,250 executives. Sixty-eight percent said they expect their organizations to increase the number of joint ventures or large partnerships they participate in over the next five years. A separate, follow-up survey in 2018 showed that 73 percent of participants expect their companies to increase the number of large partnerships they engage in. the main ones were: partners’ disagreements on the central objectives for the relationship, poor communication practices among partners, poor governance processes, and, when market or other circumstances change, partners’ inability to identify and quickly make the changes needed for the relationship to succeed (exhibit).

In our work helping executive teams set up and navigate complex partnerships, we have witnessed firsthand how these problems crop up, and we have observed the different ways companies deal with them . The reality is: successful partnerships don’t just happen. Strong partners set a clear foundation for business relationships and nurture them. They emphasize accountability within and across partner companies, and they use metrics to gauge success. And they are willing to change things up if needed. Focusing on these priorities can help partnerships thrive and create more value than they would otherwise.

Establish a clear foundation

It seems obvious that partner companies would strive to find common ground from the start—particularly in the case of large joint ventures in which each side has a big financial stake, or in partnerships in which there are extreme differences in cultures, communications, and expectations.

Yet, in a rush to complete the deal, discussions about common goals often get overlooked. This is especially true in strategic alliances within an industry, where everyone assumes that because they are operating in the same sector they are already on the same page. By skipping this step, companies increase the stress and tension placed on the partnership and reduce the odds of its success. For instance, the day-to-day operators end up receiving confusing guidance or conflicting priorities from partner organizations.

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How can the partners combat it? The individuals expected to lead day-to-day operations of the partnership, whether business-unit executives or alliance managers, should be part of negotiations at the outset. This happens less often than you think because business-development teams and lawyers are typically charged with hammering out the terms of the deal—the objectives, scope, and governance structure—while the operations piece often gets sorted out after the fact.

Transparency during negotiations is the only way to ensure that everyone understands the partners’ goals (whether their primary focus is on improving operations or launching a new strategy) and that everyone is using the same measures of success. Even more important, transparency encourages trust and collaboration among partners, which is especially important when you consider the number of executives across the organizations who will likely rotate in and out of leadership roles during the life of the relationship.

Inevitably, points of tension will emerge. For instance, companies often disagree on financial flows or decision rights. But we have seen partners articulate such differences during the negotiation period, find agreement on priorities, and reset timelines and milestones. They defused much of the tension up front, so when new wrinkles—such as market shifts and changes in partners’ strategies—did emerge, the companies were more easily able to avoid costly setbacks and delays in the business activities they were pursuing together.

Nurture the relationship

Even business relationships that start off solidly can erode, given individual biases and common communication and collaboration issues. There are several measures partners can take to avoid these traps.

Connect socially

If executives in the partner organizations actively look for opportunities to understand one another, good collaboration and communication at the operations level are likely to follow. Given time and geographic constraints, it can be hard for them to do so, but as one energy-sector executive who has negotiated and managed dozens of partnerships noted, “It’s important to spend as much time as you can on their turf.” He says about 30 to 40 percent of partnership meetings are about business; the rest of the time is spent building friendships and trust.

Keep everyone in the loop

Skipping the step of keeping everyone informed can create unnecessary confusion and rework for partner organizations. That is what happened in the case of an industrial joint venture: the first partner in the joint venture included a key business-unit leader in all venture-related discussions. The second partner apprised a key business-unit leader about major developments, but this individual did not actually join the discussions until late in the joint-venture negotiation. At that point, as he learned more about the agreement, he flagged several issues, including inconsistencies in the partners’ access to vendors and related data. He immediately recognized these issues because they directly affected operations in his division. Because he hadn’t been included in early discussions, however, the partners wasted time designing an operating model for the joint venture that would likely not work for one of them. They had to go back to the drawing board.

Recognize each other’s capabilities, cultures, and motivations

Partners come together to take advantage of complementary geographies, corresponding sales and marketing strengths, or compatibilities in other functional areas. But it is important to understand which partner is best at what . This process must start before the deal is completed—but cannot stop at signing. In the case of one consumer-goods joint venture, for instance, the two partner organizations felt confident in their plan to combine the manufacturing strength of one company with the sales and marketing strengths of the other. During their discussions on how to handle financial reporting, however, it became clear that the partner with sales and marketing strengths had a spike in forecasting, budgeting, and reporting expertise. The product team for the first partner had originally expected to manage these finance tasks, but both partner teams ultimately agreed that the second partner should take them on. In this way, they were able to enhance the joint venture’s ongoing operations and ensure its viability.

Equally important is understanding each partner’s motivation behind the deal. This is a common point of focus during early negotiations; it should continue to be discussed as part of day-to-day operations—particularly if there are secondary motivators, such as access to suppliers or transfer of capabilities, that are important to each partner. Within one energy-sector partnership, for instance, the nonoperating partner was keen to understand how its local workforce would receive training over the course of the partnership. This company wanted to enhance the skills of the local workforce to create more opportunities for long-term employment in the region. The operating partner incorporated training and skill-evaluation metrics in the venture’s quarterly updates, thus improving the companies’ communication on the topic and explicitly acknowledging the importance of this point to its partner.

Invest in tools, processes, and personnel

Bringing different business cultures together can be challenging, given partners’ varying communication styles and expectations. The good news is that there are a range of tools—among them, financial models, key performance indicators, playbooks, and portfolio reviews—companies can use to help bridge any gaps. And not all these interventions are technology dependent. Some companies simply standardize the format of partnership meetings and agendas so that teams know what to expect. Others follow stringent reporting requirements.

Another good move is to convene an alliance-management team. This group tracks and reviews the partnership’s progress against defined metrics and helps to spot potential areas of concern—ideally with enough time to change course. Such teams take different forms. One pharmaceutical company with dozens of commercial and research partnerships has a nine-member alliance-management team charged mostly with monitoring and flagging potential issues for business-unit leaders, so it consists of primarily junior members and one senior leader who interacts directly with partners. An energy company with four large-scale joint ventures has taken a different approach: its alliance-management team comprises four people, but each is an experienced business leader who can serve as a resource for the respective joint-venture-leadership teams.

Sometimes partnerships need a structural shake-up—and not just as an act of last resort.

How companies structure these teams depends on concrete factors—the number and complexity of the partnerships, for instance—as well as intangibles like executive support for alliances and joint ventures and the experiences and capabilities of the individuals who would make up the alliance-management team.

Emphasize accountability and metrics

Good governance is the linchpin for successful partnerships; as such, it is critical that senior executives from the partner organizations remain involved in oversight of the partnership. At the very least, each partner should assign a senior line executive from the company to be “deal sponsor”—someone who can keep operations leaders and alliance managers focused on priorities, advocate for resources when needed, and generally create an environment in which everyone can act with more confidence and coordination.

Additionally, the partners must define “success” for their operations teams: What metrics will they use to determine whether they have hit their goals, and how will they track them? Some companies have built responsibility matrices; others have used detailed process maps or project stage gates to clarify expectations, timelines, and critical performance measures. When partnerships are initially formed, it is usually the business-development teams that are responsible for building the case for the deal and identifying the value that may be created for both sides. As the partnership evolves, the operations teams must take over this task, but they will need ongoing guidance from senior leaders in the partner organizations.

Build a dynamic partnership

Sometimes partnerships need a structural shake-up—and not just as an act of last resort. For instance, it might be less critical to revisit the structure of a partnership in which both sides are focused on joint commercialization of complementary products than it would be for a partnership focused on the joint development of a set of new technologies. But there are some basic rules of thumb for considering changes in partnership structure.

Partner organizations must acknowledge that the scope of the relationship is likely to shift over time. This will be the case whether the partners are in a single- or multiasset venture, expect that services will be shared, anticipate expansion, or have any geographic, regulatory, or structural complexities. Accepting the inevitable will encourage partners to plan more carefully at the outset. For example, during negotiations, the partners in a pharmaceutical partnership determined that they had different views on future demand for drugs in development. This wasn’t a deal breaker, however. Instead, the partners designated a formula by which financial flows would be evaluated at specific intervals to address any changes in expected performance. This allowed the partners to adjust the partnership based on changes in market demand or the emergence of new products. All changes could be incorporated fairly into the financial splits of the partnership.

Avoiding blind spots in your next joint venture

Partners should also consider the potential for restructuring during the negotiation process—ideally framing the potential endgame for the relationship. What market shifts might occur, how might that affect both sides’ interests and incentives, and what mechanisms would allow for orderly restructuring? When one oil and gas joint venture began struggling, the joint-venture leader realized he was being pulled in opposing directions by the two partner companies because of the companies’ conflicting incentives. “It made the alliance completely unstable,” he told us. He brought the partners back to the negotiation table to determine how to reconcile these conflicting incentives, restructure their agreement, and continue the relationship, thus avoiding deep resentment and frustration on both sides of the deal.

Such dialogues about the partnership’s future, while potentially stressful, should be conducted regularly—at least annually.

The implementation of these four principles requires some forethought and care. Every relationship comes with its own idiosyncrasies, after all, depending on industry, geography, previous experience, and strategy. Managing relationships outside of developed markets, for instance, can present additional challenges involving local cultures, integration norms, and regulatory complexities. Even in these emerging-market deals, however, the principles can serve as effective prerequisites for initiating discussions about how to change long-standing practices and mind-sets.

An emphasis on clarity, proactive management, accountability, and agility can not only extend the life span of a partnership or joint venture but also help companies build the capability to establish more of them—and, in the process, create outsize value and productivity in their organizations.

Ruth De Backer is a partner in McKinsey’s New York office, where Eileen Kelly Rinaudo is a senior expert.

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Partnership Law for Business Partners Essay

Introduction, carmichael vs. evans, 1904, liability of the firm for torts, yenidjm tobacco co. ltd. 1904.

Before advising my clients on which course of action and their rights as regards to the partnership. I will need to establish whether there was a partnership and the provisions of the partnership. I will begin with definition of a partnership as relationship, which subsists between persons carrying on a business with an aim of profits. However, not relationship between persons with an aim of profits is partnership. Some relationships are formed for purposes of carrying on business with a view of profits a company or any association registered under the companies act or other laws.

A partnership is a relationship that exists between two or more persons jointly carrying out a business with the objective of making a profit. Each of the persons is called a partner and the business is referred to as a firm. A partnership is a relationship and does not, therefore, mean the firm. In a partnership a number of people work together and there is no separate identity of the partnership from the individual partners.

In order to find out whether there is existence of a partnership some rules have been laid down. These rules include:

• joint tenancy, tenancy in common, joint property, common property or part ownership does not of itself create a partnership as to anything so held or owned, whether the tenants or owners do or do not share any profits made by the use thereof.
• the sharing of gross returns does not of itself create a partnership, whether the persons sharing such returns have or have not a joint or common right or interest in any property from which or from the use of which the returns are derived.
• the receipt by a person of a debt or other liquidated amount by installments or otherwise not of the accruing profits of a business does not of itself make him a partner in the business or liable as such.
• a contract for the remuneration of a servant or agent of a person engaged in a business by a share of the profits of the business does not of itself make the servant or agent a partner in the business or liable as such.
• a person being the widow or child of a deceased partner, and receiving by way of annuity a portion of the profits made in the business in which the deceased person was a partner, is not by reason only of such receipt a partner in the business or liable as such.
• the advance of money by way of loan to a person engaged or about to engage in any business on a contract in writing with that person, signed by or on behalf of all the parties thereto, that the lender shall receive a rate of interest varying with the profits arising from carrying on the business, does not of itself make the lender a partner with the person or persons carrying on the business or liable as such.
• a person receiving by way of annuity or otherwise a portion of the profits of a business in consideration of the sale by him of the goodwill of the business is not by reason only of such receipt a partner in the business or liable as such.

On the case at hand, we are told the partnership has been in existence for the last 10 years and we are given a section of provision number 18 of the partnership deed. The section given states that “If any partner shall: – by act or default commit any flagrant breach of his duties as a partner; or act in any respect contrary to the good faith which ought to be observed between partners;… then and in any such case the other partners may by notice in writing given to him or left at the office of the partnership, expel him from the partnership…”

From the section, provided I conclude that there is a partnership among the original partners. My advice to the partners will be based on the provisions in the partnership law since only a section of the partnership deed is provided.

If they fail to agree, the partnership will have dissolved. In YENIDJM TOBACCO. CO. LTD 1904, the partnership was making profit but the relationship between the partners was so bitter that they refused to speak to each other. it was held that the partnership should be dissolved. In another case Bolton Partners v Lamberts, 1889.L made an offer to M, manager of Bolton Partners.

So Thomas Charles and Stella had formed a partnership and apart from the partnership agreement they had decided that Thomas could incur debts exceeding £300 on behalf of the firm. The remainder was in accordance to the partnership Act which means that: –

• Capital must be contributed equally, and profit should also be shared equally.
• No interest should be credited on capital.
• No interest should be charged on drawings.
• Each partner should take an active part in the management of the partnership and no salaries should be payable to them.
• All decisions should be made on the basis of majority opinions.
• Major changes like change of purpose and introduction of new partners should be on the agreement of all partners.
• Books of accounts must be kept at the principal place of business.
• Loan advances by partners will be made at an interest rate stipulated in the Partnership Act.
• How partners should be reimbursed if they incur liabilities on behalf of the partnership.
• All the partners have the right to inspect all books of accounts.
• The partners cannot carry out any competing business.
• loan repayment,
• capital repayment,
• surplus repaid on equal profit shar­ing basis.

Thomas was on official duty on behalf of the company because he was answering an important call from a client hence the company should be liable for the loss assuming that Thomas was acting as an employee and not as a partner. Partnership Act stipulates that profits and losses should be shared equally among partners.

On the part of negligence, Thomas wasn’t negligent because as a partners should also take active participation in the partnership affairs.

According to the partnership act, partners should take active participation and be honest in the running of the partnership. This is one of the important agreements of the partnership and as per the case:

This was a case Where Charles was a partner in a firm and was convicted of traveling on a train without a ticket with the intention to avoid payment. The partnership agreement provided for the dissolution of the business by other partners if he was guilty of any flagrant breach of his duties. It was held by the court that his dishonesty fell within the scope of the expulsion clause and the partnership should dissolve.

But in the case of Thomas there was no dishonesty because he was acting well on behalf of the firm so the other partners could also be in a position to contribute to the firm’s losses and liabilities.

A firm is liable for any loss or injury caused to a third party by the wrongful act or omission of a partner if they were done by him while acting in the ordinary course of the firm’s business, or with the authority of his co-partners.

In partnership law, every partner is liable in tort jointly with his co-partners for all liabilities of the firm and he is also liable severally i.e. each individual partner is liable and the plaintiff can sue each partner successively. In case of joint and several liabilities, the plaintiff has several causes of action. He can sue all the partners together, or he can sue them separately as long as his claim under tort remains unsatisfied. For example, while negligently driving the firm’s van on the firm’s business, A injures X. The latter has a right to sue A or any one of his partners or the firm. If he sues A for the tort of negligence, he is not prevented from suing the remaining partners if the judgment awarded by the court against A remains unsatisfied.

It follows from what has been stated above that the firm’s liability, arising out of contracts, differs from the liability arising under tort. The firm is jointly liable for the breach of contract i.e. the plaintiff can sue only once, but for the tort committed by a partner in the course of doing the firm’s business, the firm’s liability is joint and several i.e. the plaintiff has more than one course of action.

On decision making, Thomas could also order the water dispensing machine to become apart from him having the right to incur a debt of £300 on behalf of the firm. It was for the advantage of the firm this is because all partners have the right to make decisions on behalf of the firm and all decisions should be made on majority opinions.

Considering the fact that the partners were three and two of the partners were for the decision, then decision was to through because Charles is enthusiastic about the idea making the decision to be supported by the majority. At the same time major changes must be supported by all partners but this was not general change of business.

Thomas was a general partner because he had the authority to incur debts for the firm though not exceeding £ 300 if he did this for the purpose that is against the ordinary course of business, the firm will not be liable so it was in order for him to consult with the other partners first before renting out the two large spacious rooms at the fitness center and gets an authorized permission from partners and his act ratified by the firm.

In conclusion the relationship between partners should be geared by utmost good faith which means all partners should disclose everything of the firm and each partner should do his task to help the firm and that they should not be competition among partners. Partners should assist each other because this may lead to the dissolution of the partnership, like in the case of

This was a partnership that was making profits but although it was making substantial profits, relations between the partners were so bitter that they refused to speak to each other. Held that the partnership should be dissolved.

Gower, L.C.B. and Davies, P.L. (2006) Principles of Modern Company Law Sweet and Maxwell Jordans Cases and materials in Company law, L C Sealy, Butterworths Heinemann.

Keenan, D. Smith and Keenan’s (2006) Company Law, Longman.

Lowry, J., Dignam, A. and Padfield, (2004) Company Law, Butterworths.

Slorach, J.S. and Ellis, J. (2006) Business Law LPC Guide Oxford OUP.

• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2021, September 13). Partnership Law for Business Partners. https://ivypanda.com/essays/partnership-law-for-business-partners/

"Partnership Law for Business Partners." IvyPanda , 13 Sept. 2021, ivypanda.com/essays/partnership-law-for-business-partners/.

IvyPanda . (2021) 'Partnership Law for Business Partners'. 13 September.

IvyPanda . 2021. "Partnership Law for Business Partners." September 13, 2021. https://ivypanda.com/essays/partnership-law-for-business-partners/.

1. IvyPanda . "Partnership Law for Business Partners." September 13, 2021. https://ivypanda.com/essays/partnership-law-for-business-partners/.

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IvyPanda . "Partnership Law for Business Partners." September 13, 2021. https://ivypanda.com/essays/partnership-law-for-business-partners/.

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Essay on partnership: definition, features, advantages and limitations.

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Read this article to learn about the definition, features, advantages and limitations of partnership.

Partnership Defined:

Partnership is very comprehensively defined in the Indian Partnership Act, 1932.

The definition of the act runs as follows:

“Partnership is the relation between (or among) persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”

Point of comment:

The most significant aspect of partnership as per the above definition is that partnership is a relation among persons; and this relation is that of being a partner with one another-very much like relations subsisting among members of a family i.e. relation of brotherhood, sisterhood, parenthood etc.

Partnership relation is a relation of utmost good faith among persons, who want to be partners with one another. Each partner must observe utmost good faith towards each other, while engaged in business dealings.

Following are cited some other important definitions of partnership:

(1) “Two or more individuals may form a partnership by making a written or oral agreement that they will jointly assume full responsibility for the conduct of a business.” —Dr. J.A. Shubin.

(2) “Partnership is the relation between persons competent to make contract, who agree to carry on a lawful business in common with a view to private gain.” —L.H. Haney. Point of explanation:

The persons who enter into partnership are individually called partners, and collectively a firm. The name under which partners carry on business is called the firm name.

Features of Partnership:

Following are the salient features of partnership:

(i) Agreement:

Partnership relation is the result of an agreement between/among two or more persons. The agreement may be oral or written. A written agreement of partnership is known as the Partnership Deed.

(ii) Two or More Persons:

There must be a least two persons to form a partnership. The maximum number of persons in partnership is 10, in case of banking business; and 20 in other types of businesses.

(iii) Lawful Business:

A partnership can be formed for the purpose of carrying on any lawful business. There can be no partnership for engaging in illegal acts like theft, dacoity, smuggling etc.

(iv) Sharing of Profits:

The agreement of partnership must provide for sharing of profits of a business, among partners, in the agreed ratio. Sharing of profits is an important test of partnership. In the absence of an agreed ratio, profits are to be shared equally, by all partners.

Sharing of profits implies sharing of losses also, in the same ratio, in which profits are shared by partners.

(v) Mutual Agency:

The phrase ‘carried on by all or any of them acting for all’, contained in the definition of partnership, as given in the Partnership Act, points out to the element of mutual agency of partnership.

Mutual Agency Implies:

That every partner is an agent of the firm, for purposes of the business of the firm, and every partner is the principal to be bound by the acts of other partners, who act as agents. In fact, mutual agency is the final and conclusive proof of the existence of partnership.

(vi) Unlimited Liability:

The liability of all partners is unlimited-jointly and severally, i.e. each partner is liable to pay debts of the firm to an unlimited extent along with other partners; and if the assets of other partners are insufficient to pay business liabilities, then any one partner could be held liable to pay business debts to an unlimited extent, in his individual capacity.

(vii) Ownership and Control Jointly Held:

Normally, every partner has a right to take part, in the management of the business of the firm i.e. ownership and control are jointly held by all partners.

(viii) Non-Transferability of Share:

No partner can transfer his/her share in the partnership to any other person, without the prior consent of all other partners.

(ix) Registration not Compulsory:

Registration of a partnership firm is not compulsory. However, an unregistered firm suffers from such serious disabilities; so that sooner or later, every firm will like to get itself registered.

Advantages of Partnership:

Following are the advantages of partnership:

(i) Ease of Formation:

Formation of partnership is an easy affair. What is required is just an agreement of partnership among two or more persons; which may ever be an oral agreement. No registration of partnership is required by Law.

(ii) Large Financial Resources:

Partnership commands large financial resources; because as much as twenty persons are permitted to start partnership business. Further, the fact of unlimited liability of partners (which is both joint and several) also increases the borrowing capacity of the firm.

(iii) Balanced Decision-Making:

Partnership not only pools resources; it also combines the abilities and wisdom of a large number of persons. As such, in partnership the managerial decision-making tends to be sound and balanced, which ensures more of success of partnership business.

(iv) Incentive to Work Hard:

In partnership, there is an incentive to work hard for all partners because of the following reasons:

(a) Higher profits of the firm, as a result of hard work, will entitle partners to a larger share in the profits of the firm.

(b) By working hard, partners will try to avoid the undesirable consequences of unlimited liability; which will fall on them-in case they work carelessly.

(v) Ensures Status to all Partners:

Partnership ensures status to all partners. Every partner has a right to take part in the management of the firm. All important decisions of the firm are taken with the mutual consent of all the partners.

(vi) Secrecy of Business Affairs Maintained:

In partnership, the secrecy of business affairs could be easily maintained; since all partners have common interest in maintaining secrecy of business affairs. In fact, in partnership all partners swim and sink together.

(vii) Divided Risk:

In partnership, the business risks are divided among all partners. As such, partners could afford to be bold in taking risky, profitable and adventurous decisions.

(viii) Advantage of Partners’ Specialisation:

Usually, in partnership, the partners tend to be specialists in various areas e.g. purchasing, marketing, finance etc. Thus partnership is able to take advantage of the specialisation of many persons; each one being an expert in a particular aspect of partnership affairs.

(ix) Flexibility of Operations:

Partnership ensures flexibility of business operations. Partners can take immediate decisions to effect changes in the functioning of the business, to take the best advantage of the changing circumstances.

Limitations of Partnership:

Following are the important limitations of partnership:

(i) Unlimited Liability:

The fact of unlimited liability is perhaps, the serious-most limitation of partnership. Many good persons never have the idea of entering into a partnership agreement with others. Further, partners always try to follow most traditional systems of managing, which ensure safest business dealings. As such, partners rarely take bold decisions and restrict the growth of the firm through their conservative approach.

(ii) Uncertainty of Existence:

Life of partnership is most uncertain. Differences among partners, which are so natural now-a-days, may lead to dissolution of a well-running partnership firm.

(iii) Delayed Decision-Making:

All major decisions in partnership are taken with the mutual consent of all the partners; which may not be so easy to emerge as expected in theory. As such, partners may miss many opportunities for gain either due to delayed decisions or lack of consensus.

(iv) Risk of Implied Authority of Partners:

Every partner is an agent of the firm for purposes of the business of the firm. A dishonest or careless partner may land the firm in great difficulties because of his wrong actions.

(v) Fear of Competitive Business:

There may be a fear of a competitive business, in partnership, from partners themselves. A partner, having stolen the secrets of business of the firm may disassociate from the firm and start a competitive business of his own.

(vi) Unsuitable for Big Ventures:

Financial resources and managerial capacity of the partners are rather limited. Even a very well running and sound partnership may find itself unable to undertake very big business projects.

(vii) Non-Transferability of Ownership:

A partner cannot transfer his ownership interest in the firm to others, without consent of all other partners. This means, having invested in a partnership firm, a person may find his capital absolutely blocked in a particular business. Many persons are hesitant to become partners, on this ground.

Related Articles:

• 14 Important Characteristics of a Partnership Firm
• Rights and Obligations of Partners as Mentioned in the Partnership Act

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Essay: Partnership in Business

Sample essay.

A business partnership is one in which two or more individuals set up a business mutually with each individual investing in the setting up of the business. All the partners in a business sign a contract called the deed of partnership. This contains all the details of the partnership and states how much investment has been done by each member and what percent of profit or loss will come in each one’s share.

Business Partnership

Business partnerships are quite effective as the total liabilities although unlimited, get distributed among the various partners along with the losses and further investments. In the case of business partnerships, the revenue generation is estimated to be higher because of the higher investments.

The higher investments result from the fact that an individual cannot put up as much money in a business as compared to the combined investments by a number of individuals or investors.

However, there may be a few cons involved in a business partnership. For one, whenever there are a number of people involved in the decision-making process, arguments and disagreements are bound to take place. This sometimes also results in partners parting ways and starting their individual businesses.

On the other hand, there are some significant advantages of partnerships in business as well. In case of the absence of a partner, the other one can look after matters. Also, when different partners work together, the overall result can be far more effective as each one may have a different area of interest and various aspects related to a matter can be considered and well thought out.

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Advantages and Disadvantages of Partnership, Essay Example

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Sole proprietorship is a business run and owned by one person where the law does not distinguish the business from the owner. It is the easiest business to establish since there are no requirements that formally guide on how to start and the capital required is minimal. The proprietor has unlimited personal liability and is at the liberty of deciding what to do with his profits/losses.

A sole trader gets to enjoy several advantages for running this type of business.  For instance, the business requires minimum capital to start up as well as few formal requirements. Decision making is easy in this case since it’s done by one person hence taking a short time. The tax returns procedure is also simple because the owner submits the business returns in his personal income form. The proprietor completely controls the business so he can decide to sell or transfer it at his own discretion.

Sole proprietorship also has some cons. In its formation, this business is not a separate business entity which implies that the business ceases to exist when the owner dies or becomes disabled. This form of organization is said to have unlimited liability. The owner is therefore liable for obligations and debts of the business. Decisions are only made by the proprietor and this exposes him to the risk of making uninformed decisions unlike in corporations where decision making is collective. It is unlikely that investors will be interested in sole proprietorships which cause challenges in raising capital and this too works to its disadvantage.

Partnership is a form of business organization where two or more parties come together to carry on a business or trade for mutual benefit. The partners share liabilities, profits, debts and losses equally depending on whether one is a general partner or a limited partner. General partners participate equally in daily management of the business while limited partners take a bigger part in investing but are not involved in management directly. Profits and losses are shared amongst the partners after which each person is taxed individually.

Partnerships do not have to be registered with the state hence are not expensive to start up unlike corporations. A partnership is not entitled to corporate taxes because profits and losses are distributed amongst the partners and they are taxed individually. In general partnership, all partners are disadvantaged because they will be personally held liable in case the business incurs liabilities and debts. (Nolo.com 1999)

Corporations are businesses that are created as a result of corporate law. The corporation’s existence is said to be distinct from its members. It acts as a separate entity such that it can transact, sue and be sued and do other things like paying tax separately from its owners. According to LLI n.d., individual states have the power to promulgate laws relating to creation, organization and dissolution of corporations. In every corporation, there’s need to have articles of incorporation to keep a record of its creation and to outline instructions on how to manage internal affairs. It is also assumed that those corporations adopt bylaws to clearly outline obligations and rights of parties involved in its structure.

Some of the major advantages enjoyed by corporations are limited liability which means that the shareholders’ assets are not at risk in case of debts or liabilities. Corporations pay corporate taxes which are relatively lower especially if the company is making huge profits. Due to their large nature and structure, corporations attract investors as well as talented and skilled employees since it is capable of offering stock or options as an incentive. Corporations also have well defined structures that are operational, have a perpetual existence and transfer of shares is done freely.

On the other hand, corporations are disadvantaged due to high costs of incorporation, mandatory legal formalities, huge paperwork involved in their running and requirements that involve disclosure of corporate directors’ and officers’ names. Dissolving corporations is a lengthy process that can sometimes be very expensive.

Limited liability companies are termed to be flexible in that they combine elements of partnership structures, corporate structures and even sole proprietorship structures. The limited liability company has several things in common with different forms of business organization. For instance, in a corporation and a partnership, it shares limited liability and the ability to pass-through income taxation respectively.

The positive impacts of forming a limited liability company include its limited liability, ability to avoid double taxation, simplicity in establishment and management, flexibility when it comes to distribution of income, no limitation on ownership and its attractiveness to investors worldwide. There are however a few drawbacks in limited companies. These are; business complications between states due to differences in laws governing limited liability companies, set limit of its existence and undefined procedures due to its newness. An aggressive entrepreneurial firm would best fit in a limited liability company since it allows for flexibility in running the company.

LLI ( n.d.). Corporations. Retrieved on November 11, 2010 from http://topics.law.cornell.edu/wex/Corporations

Nolo.com (1999). Advantages and disadvantages of Partnership. Retrieved on November 11, 2010 from http://www.inc.com/articles/1999/10/14602.html

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Essay on Sole Proprietorship, Partnership, and Incorporated Companies

• Sole Proprietorship

A sole proprietorship is a type of business entity that is run and owned by a single person, and there is no legal distinction between the enterprise and the owner. It can also be referred to as individual entrepreneurship or sole trade ship. There can be many people operating the work in this business, but the owner must be only one person. Examples of this business entity include those small works or organizations such as an artist, operating a local kiosk, freelancers, consultants, a local grocery store, and other small businesses owned by a single person. Below are the characteristics of a sole proprietorship, its advantages, and disadvantages.

Characteristics

The following are the characteristics that differentiate a sole proprietorship from other business entities: It has single ownership; sole proprietorship is owned wholly by a single person who funds the business in his way, either from his capital or loans. Secondly, the decision regarding the business is made by one person, the owner (Corporate Finance Institute). The owner cannot consult anybody; however, the owner can employ other peoples to assist him in doing various work. Third, the business is small in size; since the place of the business is limited, the scale of operation therefore becomes small.

In sole proprietorship business, there are no legal formalities needed when starting or dissolving the business and therefore, there is no legal entity. Therefore, the law have no any distinction regarding the owner and the business; if the owner becomes bankrupt or dies, that’s the end of the business and it is dissolved (Corporate Finance Institute). Sole proprietorship has unlimited liabilities; the owner of the business is personally held liable for the debts and loans the business may be having. Lastly, the entity does not allow profit-sharing; this is because the business is owned by one person and all the profit the business makes, they belong to him alone.

Sole proprietorship has various advantages that the owner may enjoy over other types of business, the following are its advantages: it is easy and simple to start and run the business; this is because the process of starting sole proprietorship requires little paper work and few or no fees. Secondly, government regulations needed are few; different from other corporations, this business does not require resources like reporting financial information to the public (Corporate Finance Institute). Third, the owner get to enjoy the profit earned alone, proprietor does not share profit unlike other entities. Lastly, sole proprietorship less capital required and there is an advantage of tax; the tax is paid only once unlike other entities.

Disadvantages

Despite having a lot of enjoyments, sole proprietorship contain several limitations and disadvantages that the owner may experience. First, the entity has unlimited liability; because the business cannot have a separate legal entity, the owner have unlimited liabilities for all debts of the business. This means, if the entity fails to meet financial obligation, creditors can ask for the repayments and the owner may be needed to use their personal properties. Secondly, unlike partnership, the owner does not share loss with any person; they are fully liable for the loss that the business incurs. Lastly, sole proprietorship have limited size, it lacks continuity, and the capital is also limited.

• Partnership

A partnership is a business entity that involves two or more people who come together and start a business with an aim of getting the profits. According to Dr. John A. Shubin, it is a business where two or more person forms a partnership through an oral or written agreement that they will cooperatively accept full responsibility in conducting the business. The partners come into the agreement and they share the starting capital where they either share equally, or use some ratio. The minimum number of persons for partnership is two and the maximum is twenty. However, this business has various types of arrangements:  General partnership ; is a partnership where partners agrees in sharing all legal liabilities, assets, and profits.  Limited partnership ; it is a partnership where there are limited partners who are only liable up to their investment amount.  Limited liability partnership ; in this partnership, all partners carries on the business but their liabilities for one another’s deeds are limited.  Limited liability limited partnership;  this type gives all partners liabilities protection by limiting the general partner’s liabilities.

Just like other businesses, partnership has characteristics that distinguishes it from other business entities, they include: It is a contractual relationship; the partnership is formed only when there is a contract between two or more people/groups. According to Partnership Act, “The association of partnership appears from contract and not from status.” The contract can be done orally or can be written or both; an oral contract is adequate but it is normally finer to draft a partnership deed that specify every partner’s duty, their obligations, rights, and terms and conditions. Second, partnership has two or more people; for this business to exist, there must be a minimum of two person and a maximum of twenty.

Third, there is profit and loss sharing among the partners; the aim of partnership is to earn the profit. The profit earned during their business is divided amongst the as per their agreement, consequently, sometimes business may experience loss and as usual, they share the loss incurred. Fourth, unlimited liability; the liability of each partner is limited, therefore, creditors can recover their loans and debts from the partner’s private properties. Fourth, there is implied authority; each partner in the business can act as an agent where one can bind the other for the actions done by him on behalf of all partners like hiring and firing workers, sale and purchase of business products, borrowing money, and other acts. Lastly, there are restrictions of transfer of shares; no partner is allowed to transfer or sell their shares to anyone with intentions of making them partners. However, an addition or exist of one or more member leads to dissolution of the partnership.

Being in a partnership business has the following benefits: In partnership, making decision is easy and robust since ideas concerning the decision are made by all partners. Partnership also saves individual money since every expenses and capital are shared amongst the members; therefore, more cash is raised and more saving is done. Unlike other business entities, partnership allow loss-sharing; this is an advantage since individuals will not feel the burden of the loss unlike being a sole proprietor. There is sharing of work and moral support since every partner is entitled to perform certain work in the business.

It is easy to start a partnership business since raising of funds is easy and the legal requirements and obligations are few. In partnership, there is access to knowledge thus leading to learning new skills and experience from other partners; by this, the business run smoothly since there is sharing of ideas. Compared to companies and cooperatives, partnership has more privacy; its affairs are confidential and they remain within the partners. Lastly, unlike sole proprietorship, partnership allow sharing of burdens where business is managed by more than one person; therefore, individual can have time for personal work.

While partners may enjoy numerous advantages, just like any other business, it has several disadvantages. The business has unlimited liabilities; since it lacks separate legal entity, partners are all liable for business debts. Therefore, they can have trouble of losing their private properties to the creditors in case their business fails to pay off debts. Unlike sole proprietorship, individual cannot enjoy whole profits in partnership since the profit is shared amongst the partners. In a business with more than one person, potential conflict and differences may arise due to difference in views and strategic directions; this is because every partner wants to demonstrate their abilities. Lastly, in partnership there is limitation on business development, limited access to capital, it lacks independent legal status, and decision making process may be slower since it involves many people.

• Incorporated Companies

Incorporated companies, or corporations, are the separate legal entities from the person or people creating them; officers and directors buy shares in the business, and have control for their functioning’s. Incorporations therefore limit people’s liabilities in case of a lawsuit; directors do not have personal liabilities toward company’s debts. Incorporation means registering companies in registrar of company, hence, it assist the board of directors and management to perform risks that aid in the growth without affecting them.

They have  limited liability ; the liabilities of a share­holder and directors of an organization are limited. Shareholders are only liable to pay their own shares in the company but their private properties cannot be taken in compensation of the company debts.

Capital acquisition : It is easy for corporation to obtain equity and debt, because financial resources does not strain it. Therefore, new investors can be sold shares as well as bonds to bigger entities with an aim of financing debt.

Dividends : Dividends are issued to investors as a way of payment and this varies from that of other entities like partnership or sole businesses.

Double taxation : A corporation uses their earnings to pay income, it also pay income tax for the payment made to the investors through dividends; this therefore leads to the double taxation.

Life span : A corporation has a long lifespan since it is protected by law and it does not depend on the owner, however, owner can terminate it any time required.

Ownership : Corporations ownerships are determined by the total shares owned and they can be the ownership can be shifted through selling and buying of them.

Professional management : Those investors who directly own the company does not manage it, rather, they hire professionals to run the organization but report to them.

Separate entity : A corporation is whole separate in its operation and it is operated under the law; there are numerous rights and responsibilities of individuals.

Incorporating offers liability protection where investors, shareholders, and directors cannot lose their private assets unlike sole proprietorship and partnerships. Also, individual and company taxes are separated; incorporating allows people to separate their personal taxes and therefore it may result to lower taxes. The third advantage of incorporated company’s income splitting opportunities occurs; by this, companies can pay their shareholders through dividends where shareholders must not be active in order to get them. Lastly, incorporating helps in succession planning where it gets to enjoy perpetual existence unlike partnership and sole proprietorship where the death of one partner or member leads to the dissolution of the business.

Despite protecting its employees from liabilities, incorporating has several disadvantages; one of them is it is costly to initiate and run the business. Secondly, compared to other business entities, incorporating requires a lot of paper work and much time. During its establishment, the following legal documents need to be filled, Articles of Incorporation, non-disclosure agreements, certificates of good standing, company bylaws, and more. They are strictly governed by laws and regulations, and they are greatly monitored by the government. Another disadvantage that they experience is through double taxation where they end up paying more taxes unlike other businesses (Patria). Lastly, owners have no control over the business, those individuals from small shareholders lacks effective control over decision made in the company; they just follow decisions that have been made by management.

Corporate Finance Institute. “Sole Proprietorship – Definition, Advantages and Disadvantages.”  Corporate Finance Institute , 2 July 2020, corporatefinanceinstitute.com/resources/knowledge/strategy/sole-proprietorship/.

Hearn, Edward Ned R. “Business Entities.”  The Musician’s Business & Legal Guide . Routledge, 2017. 10-17.

Kiss, Lívia Benita. “The Importance of Business Partnership on the World Wide Web.” (2020).

Iossa, Elisabetta, and David Martimort. “The simple microeconomics of public‐private partnerships.”  Journal of Public Economic Theory  17.1 (2015): 4-48.

Patria, Ayush. “Advantages and Disadvantages of Incorporation of Company.”  Law Column , 27 Nov. 2020,  www.lawcolumn.in/advantages-and-disadvantages-of-incorporation-of-company/ .

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Essay on partnership form of business

The partnership form of business organisation grew out from the limitations of sole proprietor­ship. When the business expands, one man is unable to arrange the financial resources and bear the risks.

He cannot supervise and manage all the functions of business personally. Therefore, two or more persons join hands and combine their capital and skill to start and run a business, Partnership is thus an extension of sole proprietorship.

A partnership is a voluntary association of two or more persons who agree to carry on some business jointly and share its profits and losses. They combine their funds and skills to carry on business together. Some popular definitions of partnership are as follows:

Partnership is the relation existing between persons competent to make contract, who agree to carry on a lawful business in common with a view to private gain.

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A partnership or firm as it is often called is, then a group of men who have joined capital or services for the prosecuting of some enterprise.

Partnership is the relation between persons who have agreed to share profits of a business carried on by all or any one of them acting for all.

A Partnership is a form of business organisation in which two or more person’s upto a maximum twenty join together to undertake some form of business activity.

Two or more individuals may form a partnership by making a written or oral agreement that they will jointly assume full responsibility for the conduct of business.

The persons who enter into partnership with the one another are individually called ‘partners’ and collectively a ‘firm’. The name under which they carry on business is called the ‘firm name’.

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Avolon's Paul Geaney honored by Irish American Partnership in NY

The Irish American Partnership has presented its 2024 New York Business Leadership award to Paul Geaney, President & Chief Commercial Officer at Avolon.

The award was celebrated at a breakfast reception last Thursday at the historic Union League Club of New York attended by over 300 business leaders, friends and supporters.

Mr. Geaney told the gathering: "I’m very grateful to the Irish American Partnership for this award, which I accept on behalf of the Avolon team, whose amazing efforts have built us into one of the world’s leading aviation finance companies. 

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“We take great pride in using our expertise, our capital and our orderbook of new aircraft to support our customer airlines in facilitating the social and economic benefits of air travel,” he added. “The Partnership’s philanthropic work funding education, community development and peace initiatives in Ireland is hugely important and all involved are to be commended for their ongoing support."

A founding member of the Avolon team in 2010, Mr. Geaney was appointed as Avolon’s Chief Commercial Officer in July 2021, adding the role of President in July 2022. He had previously held Head of Americas, Head of OEM, and Chief Risk Officer roles. A Dublin native, Geaney holds a Bachelor in Economics and Politics from Trinity College Dublin, and served on the Board of the International Society of Transport Aircraft Trading (2019-2023). 

Avolon is a global leader in aviation finance, with 145 airline customers in 64 countries, and an owned, managed and committed fleet of 1,033 aircraft. In its 2023 financial results it reported net income of $339m and $31bn in total assets. 

Chairman of the Partnership Michael T. Clune presented the 2024 recipient with the award, saying: “We would like to congratulate Paul on his innovation and contribution to Irish business, and to the global aircraft leasing industry. This award is truly deserved and is a testament to Paul’s ingenuity, and hard work. He now shares the Irish American Partnership Business Leadership Award with some of the titans of global commerce.”

Irish American Partnership Chairman Michael T. Clune, left, with Paul Geaney,  2024 New York Business Leadership award recipient and President & CCO, Avolon, and Irish American Partnership Board Member Brian Ruane of BNY Mellon.

Mr. Geaney also participated in an in-depth interview with Brian Ruane, Senior Executive Vice President with BNY Mellon and a board member of the Partnership. 

Mr. Ruane co-chaired the 2024 Business Leadership Breakfast with board member of the Partnership Tommy Dwyer and Sean Clune, President of Clune Construction New York.  

Irish American Partnership previous honorees include Adrian Jones, Chairman and Co-Head, Global Private Equity, Goldman Sachs; Stan McCarthy, former Chief Executive, Kerry Group; Michael Dowling, President and Chief Executive at Norwell Health; and Bernie Brennan, President of the Royal Dublin Society.  

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Live updates, microsoft revenue surges 17%, driven by ai gains, chatgpt partnership.

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Microsoft beat Wall Street estimates for third-quarter revenue on Thursday, driven by gains from AI adoption across its cloud services and business software products.

Revenue rose 17% to $61.9 billion in the quarter ended March, compared with analysts’ consensus estimate of $60.80 billion, according to LSEG data.

Shares of the Redmond, Wash.-based company gained 5% after the bell. The stock has soared on Microsoft shipping genAI tools based on its strategic partnership with ChatGPT creator OpenAI and also helped it capture the world’s most valuable company crown from Apple earlier this year.

Revenue from Microsoft’s Intelligent Cloud unit, which houses the Azure cloud computing platform, rose to $26.7 billion, compared with analysts’ average estimate of $26.24 billion, LSEG data showed.

Azure revenue rose 31%, higher than a 29% growth estimate from market research firm Visible Alpha.

Microsoft does not break out the absolute revenue figure for Azure, the part of its business best situated to capitalize on booming interest in artificial intelligence.

The Copilot tool – a set of genAI assistants launched in November for $30 a month – along with a  recovery in personal computer sales  has lifted Microsoft’s enterprise software and Windows businesses.

Still, the costs of AI push were brought to the forefront after Facebook parent Meta Platforms raised its annual expenses and capital expenditure forecasts .

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An NPR editor who wrote a critical essay on the company has resigned after being suspended

FILE - The headquarters for National Public Radio (NPR) stands on North Capitol Street on April 15, 2013, in Washington. A National Public Radio editor who wrote an essay criticizing his employer for promoting liberal reviews resigned on Wednesday, April 17, 2024, a day after it was revealed that he had been suspended. (AP Photo/Charles Dharapak, File)

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NEW YORK (AP) — A National Public Radio editor who wrote an essay criticizing his employer for promoting liberal views resigned on Wednesday, attacking NPR’s new CEO on the way out.

Uri Berliner, a senior editor on NPR’s business desk, posted his resignation letter on X, formerly Twitter, a day after it was revealed that he had been suspended for five days for violating company rules about outside work done without permission.

“I cannot work in a newsroom where I am disparaged by a new CEO whose divisive views confirm the very problems” written about in his essay, Berliner said in his resignation letter.

Katherine Maher, a former tech executive appointed in January as NPR’s chief executive, has been criticized by conservative activists for social media messages that disparaged former President Donald Trump. The messages predated her hiring at NPR.

NPR’s public relations chief said the organization does not comment on individual personnel matters.

The suspension and subsequent resignation highlight the delicate balance that many U.S. news organizations and their editorial employees face. On one hand, as journalists striving to produce unbiased news, they’re not supposed to comment on contentious public issues; on the other, many journalists consider it their duty to critique their own organizations’ approaches to journalism when needed.

In his essay , written for the online Free Press site, Berliner said NPR is dominated by liberals and no longer has an open-minded spirit. He traced the change to coverage of Trump’s presidency.

“There’s an unspoken consensus about the stories we should pursue and how they should be framed,” he wrote. “It’s frictionless — one story after another about instances of supposed racism, transphobia, signs of the climate apocalypse, Israel doing something bad and the dire threat of Republican policies. It’s almost like an assembly line.”

He said he’d brought up his concerns internally and no changes had been made, making him “a visible wrong-thinker at a place I love.”

In the essay’s wake, NPR top editorial executive, Edith Chapin, said leadership strongly disagreed with Berliner’s assessment of the outlet’s journalism and the way it went about its work.

It’s not clear what Berliner was referring to when he talked about disparagement by Maher. In a lengthy memo to staff members last week, she wrote: “Asking a question about whether we’re living up to our mission should always be fair game: after all, journalism is nothing if not hard questions. Questioning whether our people are serving their mission with integrity, based on little more than the recognition of their identity, is profoundly disrespectful, hurtful and demeaning.”

Conservative activist Christopher Rufo revealed some of Maher’s past tweets after the essay was published. In one tweet, dated January 2018, Maher wrote that “Donald Trump is a racist.” A post just before the 2020 election pictured her in a Biden campaign hat.

In response, an NPR spokeswoman said Maher, years before she joined the radio network, was exercising her right to express herself. She is not involved in editorial decisions at NPR, the network said.

The issue is an example of what can happen when business executives, instead of journalists, are appointed to roles overseeing news organizations: they find themselves scrutinized for signs of bias in ways they hadn’t been before. Recently, NBC Universal News Group Chairman Cesar Conde has been criticized for service on paid corporate boards.

Maher is the former head of the Wikimedia Foundation. NPR’s own story about the 40-year-old executive’s appointment in January noted that she “has never worked directly in journalism or at a news organization.”

In his resignation letter, Berliner said that he did not support any efforts to strip NPR of public funding. “I respect the integrity of my colleagues and wish for NPR to thrive and do important journalism,” he wrote.

David Bauder writes about media for The Associated Press. Follow him at http://twitter.com/dbauder

Senior NPR editor resigns after accusing outlet of liberal bias

An editor for National Public Radio resigned Wednesday just days after he inflamed the ongoing culture war about mainstream media with an essay about what he considers the news outlet’s liberal leanings.

Uri Berliner, who was a senior business editor, wrote an essay for the right-leaning online publication The Free Press in which he said he believes NPR is losing the public’s trust. 

NPR, a nonprofit radio network, has an “absence of viewpoint diversity,” he wrote in the essay, which was published April 9. It “has always had a liberal bent,” but now an “open-minded spirit no longer exists within NPR,” he wrote.  

The essay triggered a wave of scrutiny of NPR from conservatives, some of whom responded to it with calls to defund the news organization, which receives federal funding through the Corporation for Public Broadcasting. NPR says on its website that federal funding is “essential” to NPR but that “less than 1% of NPR’s annual operating budget comes in the form of grants from CPB and federal agencies and departments.”

In a resignation statement on X, Berliner briefly elaborated on the reason for his departure, which came days after NPR reported that it had suspended him for five days without pay following the op-ed’s release. 

NPR’s chief business editor, Pallavi Gogoi, had told Berliner about its requirement to secure approval before he appeared in outside media, according to NPR’s report.

“I don’t support calls to defund NPR,” Berliner wrote. “I respect the integrity of my colleagues and wish for NPR to thrive and do important journalism.  But I cannot work in a newsroom where I am disparaged by a new CEO whose divisive views confirm the very problems at NPR I cite in my Free Press essay.” 

Berliner did not immediately respond to a request for comment Wednesday. A representative for NPR said it “does not comment on individual personnel matters.” 

Berliner’s essay gained traction on X, with many conservatives homing in on his thoughts about NPR’s political makeup. He wrote: “In D.C., where NPR is headquartered and many of us live, I found 87 registered Democrats working in editorial positions and zero Republicans. None.” 

He also criticized NPR’s coverage, or lack thereof, of certain stories, such as the Mueller report, Hunter Biden’s laptop, the origins of Covid-19 and systemic racism following the murder of George Floyd.

High-profile supporters of Berliner’s essay, including former President Donald Trump and X owner Elon Musk, shared criticism of NPR and its CEO, Katherine Maher. 

“NO MORE FUNDING FOR NPR, A TOTAL SCAM! EDITOR SAID THEY HAVE NO REPUBLICANS, AND IS ONLY USED TO ‘DAMAGE TRUMP.’ THEY ARE A LIBERAL DISINFORMATION MACHINE. NOT ONE DOLLAR!!!” Trump wrote on Truth Social on April 10.

Musk wrote on X that the “head of NPR hates the Constitution of the USA” in response to a clip of Maher discussing the challenges in fighting disinformation and honoring the First Amendment right to free speech.

Meanwhile, some journalists at NPR pushed back against Berliner’s accusations.

“Morning Edition” co-host Steve Inskeep shared his take in a post on his Substack newsletter , saying he believes Berliner failed to “engage anyone who had a different point of view.”

“Having been asked, I answered: my colleague’s article was filled with errors and omissions,” he wrote, adding, “The errors do make NPR look bad, because it’s embarrassing that an NPR journalist would make so many.”

NPR’s chief news executive, Edith Chapin, also denied Berliner’s assessment of the newsroom in a memo to staff members, according to NPR .

“We’re proud to stand behind the exceptional work that our desks and shows do to cover a wide range of challenging stories,” she wrote. “We believe that inclusion — among our staff, with our sourcing, and in our overall coverage — is critical to telling the nuanced stories of this country and our world.”

Maher also said Monday in a statement to NPR : “In America everyone is entitled to free speech as a private citizen. What matters is NPR’s work and my commitment as its CEO: public service, editorial independence, and the mission to serve all of the American public. NPR is independent, beholden to no party, and without commercial interests.”

Daysia Tolentino is a culture and trends reporter for NBC News.