Partnership Fundamentals

What is a partnership?

• A partnership involves only one individual running a business

• A partnership is a legal document

• A partnership is a type of fruit

• A partnership is a business structure where two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Deed.

What are the main characteristics of a partnership?

• Individual liability for the partners

• Shared profits only

• Shared profits and losses, shared management responsibilities, mutual agency, limited life of the partnership, and unlimited liability for the partners.

• Limited life of the partnership

What is the difference between general and limited partners?

• Limited partners have unlimited liability and are actively involved in management.

• General partners have unlimited liability and are actively involved in the day-to-day operations of the business, while limited partners have limited liability and are typically passive investors with no involvement in management.

• General partners have limited liability and are typically passive investors.

• General partners have limited liability and are passive investors.

How are profits and losses shared in a partnership?

• Based on the partnership agreement

• Determined by the partner who invested the most capital

• Based on the number of years each partner has been in the business

• Equally divided between all partners

What is a partnership agreement?

• A partnership agreement is only necessary for large corporations.

• A partnership agreement is a legal document that outlines the terms and conditions under which partners operate their business.

• A partnership agreement is a document outlining personal matters of the partners.

• A partnership agreement is a handshake deal between partners.

What are the advantages of forming a partnership?

• Shared decision-making, shared resources, division of labor, increased credibility, and potential tax benefits.

• Unlimited liability for debts

• Decreased flexibility in decision-making

• Higher risk of conflicts and disputes

What are the disadvantages of forming a partnership?

• Equal distribution of workload

• Limited liability for debts incurred by other partners

• Shared profits, shared decision-making, potential disagreements among partners, unlimited liability for debts incurred by other partners, and the possibility of one partner's actions affecting the entire business.

• Reduced financial risk

How can a partnership be dissolved?

• Unanimous decision of one partner, change in market conditions, personal conflicts between partners

• Mutual agreement between the partners, expiration of the partnership term, completion of the partnership purpose, bankruptcy of one partner, or court order.