In a partnership form of business, two or more individuals come together to jointly operate and manage a business for profit. It implies a business structure where the owners, known as partners, share the responsibilities, profits, and losses of the business.
1. **Individuals come together to do business:** Partnerships involve individuals, rather than a single person or a large group, forming an agreement to run a business together. This allows for shared decision-making and pooling of resources.
2. **Two types of partnerships - general and limited:**
- **General partnership:** In a general partnership, all partners share equal responsibility in the management and decision-making of the business. They also share equally in the profits and losses unless otherwise specified in a partnership agreement.
- **Limited partnership:** A limited partnership consists of both general partners who actively manage the business and limited partners who contribute capital but have limited involvement in the day-to-day operations. Limited partners have limited liability, meaning their financial risk is restricted to their investment in the business.
Partnerships offer advantages such as shared decision-making, combined resources, and flexibility in management. However, it is essential for partners to have a clear partnership agreement outlining each partner's roles, responsibilities, profit-sharing arrangements, and procedures for dispute resolution to ensure a smooth operation of the business.
