A partnership is a type of unincorporated business organization in which multiple individuals, called general partners, manage the business and are equally liable for its debts; other individuals called limited partners may invest but not be directly involved in management and are liable only to the extent of their investments. Unlike a Limited Liability Company or a corporation, in a partnership each partner shares equal responsibility for the company's profits and losses, and its debts and liabilities. The partnership itself does not pay income taxes, but each partner has to report their share of business profits or losses on their individual tax return.
Excellences of partnership firm include operation of business being very simple and uncomplicated in nature. No written agreement for the business structure is required and the profits belong to the partners completely. Another advantage of a partnership firm is that resources of different partners can be pooled together.
As for the failures a partnership firm is the concept of unlimited liability and this liability extends to the personal assets of the partners as well. Another major disadvantage is inability to attract huge amount of investment which is not in the nature of debt. A partnership ceases to exist at the death, insolvency of one of the partners. There is no clear line of authority and the debt of one partner extends to other as well.
Alternative Business Structures other than Partnership
The alternative successful business structures other than partnership include Limited Liability Partnership (LLP) and a Corporation. LLP is a type of partnership recognized in many states that protects individual partners from personal liability for negligent acts committed by other partners and employees not under their direct control. In this case liability can be kept limited to the extent of partners investments made in the business while maintaining the small and uncomplicated business structure. On the other hand a Corporation is a form of organization that provides its owners and shareholders with certain rights and privileges, including protection from personal liability, if proper steps are followed. Corporations may take a number of forms, depending on the goals and objectives of the founders. Corporations are regarded as “persons” in the eyes of the law and may thus sue and be sued, own property, borrow money and hire employees.
It requires a more detailed business structure; it has the benefits of perpetual succession, limited liability and the ability to attract funds.
Excellences of partnership firm include operation of business being very simple and uncomplicated in nature. No written agreement for the business structure is required and the profits belong to the partners completely. Another advantage of a partnership firm is that resources of different partners can be pooled together.
As for the failures a partnership firm is the concept of unlimited liability and this liability extends to the personal assets of the partners as well. Another major disadvantage is inability to attract huge amount of investment which is not in the nature of debt. A partnership ceases to exist at the death, insolvency of one of the partners. There is no clear line of authority and the debt of one partner extends to other as well.
Alternative Business Structures other than Partnership
The alternative successful business structures other than partnership include Limited Liability Partnership (LLP) and a Corporation. LLP is a type of partnership recognized in many states that protects individual partners from personal liability for negligent acts committed by other partners and employees not under their direct control. In this case liability can be kept limited to the extent of partners investments made in the business while maintaining the small and uncomplicated business structure. On the other hand a Corporation is a form of organization that provides its owners and shareholders with certain rights and privileges, including protection from personal liability, if proper steps are followed. Corporations may take a number of forms, depending on the goals and objectives of the founders. Corporations are regarded as “persons” in the eyes of the law and may thus sue and be sued, own property, borrow money and hire employees.
It requires a more detailed business structure; it has the benefits of perpetual succession, limited liability and the ability to attract funds.
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