PARTNERSHIP

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PARTNERSHIP What is a partnership? • Legal arrangement in which 2+ persons called partners join together • They share profits and losses What are some advantages of a partnership? �... �� Both partners can bring together greater financial resources • Combines abilities of owners and the order base of skills • Simple to organize, required to register with the firm in the provincial government • Make decisions without having to involve or report to a wide group of people • Partnership does not pay its own income tax and avoids complications of double taxation What are some disadvantages of a partnership? • Limited life, meaning that it can be terminated by law if any of the partners dies, goes bankrupt or becomes mentally ill • Most partners have unlimited liability: Meaning every partner is liable for the debts of the partnership • They have mutual agency, which means all partners are bound by the actions of any of the partners. If one of the partners makes a poor decision, the others cannot say that they are not responsible. What are the types of partners? • Sleeping partner: Contributes capital but does not partake in the day-to-day activities • Limited partner: His/Her liability is limited only to the capital contribution to the business • General partner: Unlimited liability, and usually manages the business. Might have to sell personal assets to pay off any debts What should be included in the partnership agreement? Basic info: - Name and location of the business - Purpose of business - Date of Inception Specifies relationship of partners: - Names and capital contributions of partners - Rights, duties, and salary of partners - Basis for sharing net income/loss [Show More]

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