Partnership

Answer

Partnership

A partnership is a business organization where two or more individuals co-own a firm, plant, or entity, and individually share its risks, losses, and profits. Forming a partnership necessitates a voluntary "association" of individuals who jointly own the entity and aim to carry out the business for profitability. People may form a partnership through oral or written agreements, and partnership pacts usually govern the partners' relationships to the partnership and to one another (Kelly, Hammer & Hendy, 2014). A partnership can overall include business associations, other partnerships, corporations, and individuals. Consequently, some partnerships consist of large corporations and individuals. Members of the family can as well form and operate partnerships; however, law courts normally take a close look at the family business structure before recognition as a partnership so as to benefit business's creditors. Partnership agreements ought to at least cover how crucial decisions are to be resolved, the responsibilities and rights of every partner, procedures associated with the withdrawal of capital from the partnership, provisions concerning how to terminate and add partners, what procedure to follow for the dissolution of the partnership, the proportions of partnership losses and gains to be apportioned to every partner, and whether partners are designated as limited partners or general partners.

A partnership often protects franchisees against personal liability from claims and has few statutory requirements. Being in partnership also results in freedom in management because unlike the corporations, partnerships are never required to have book requirements, annual meetings, and board of directors (Bayern, 2015). However, the law imposes various duties on the partners involved in a partnership. Firstly, the partners must register the business name, open a bank account in the name of the partnership, obtain all the licenses required by government where the partnership plans to carry out its duties from, get an employer identification number, and file an annual informational return (Bayern, 2015). The law also requires partnership agreements to have the address as well as name of every partner and his or her contributions to the business.

There are three forms of partnerships, general partnerships, limited liability partnerships (LLP), and limited partnership (LP). Each individual in a general partnership is liable for every action of the partnership. In this type of organizational structure, every partner is personally liable for every debt as well as judgment against the partnership, irrespective of whether the debt was incurred by one of the individual partners or by the business as a whole. In limited partnership, however, the partners only risk the assets they have invested in the business. Unlike general partnerships, limited partners do not play an active role in the daily operations of the firm. A limited partner's individual assets are protected against debt or judgment which the partnership may incur (Gandhi & Thankur, 2014). A limited partnership also provides the partners with a platform of investing in the firm with the promise of returns on the investments. More importantly, limited partners get the benefits of protection against all kinds of liabilities the entity may experience beyond their first investments. On the other hand, a limited liability partnership is where all or some partners have limited liabilities. In a limited liability partnership, every partner is not liable or responsible for another partner's negligence or misconduct. As such, the partners have protection from others’ mistakes.