Q3. a) Define Partnership?
b) Describe the advantages of Partnerships?
DEFINITION OF PARTNERSHIP:
Partnership may be defined as the association of two or more persons joining hands to carry out business for profit. The partnership act 1932 defined Partnership as:
‘’The relation between persons who have agreed to share the profit of business carried on by all or any one of them acting for all’’
The maximum number of persons who could join hand in partnership are twenty persons who have entered into partnership with one another are called partner and collectively a form.
ADVANTAGES OF PARTNERSHIP
The following are the main advantages of partnership
1) LARGE AMOUNT OF CAPITAL:
In a partnership, Capital can be easily increased to a larger extent due to greater number of persons owing the business.
2) CREDIT STANDING:
Credit standing of partnership is higher than that of sole ownership business in view of greater protection that is available on account of unlimited liability of partners.
Hence partnerships have the highest credit standings and is regarded more safe and secure as compared to sole proprietorship.
3) COMBINED JUDGEMENT AND MANAGEMENT SKILLS:
Partnerships consist of two or more persons joining hand and as such it is in a better position to handle things and work after the business activities. The old saying that two heads are better than one can apply over here and partners could decide on problems and manage the firm more effectively.
4) RETENTION OF VALUABLE EMPLOYEES:
Valuable employers who appear the in dispersible for the business but instead to go out for better carrier may be retained by making partners in solve ownership it is not possible.
5) PERSONAL INTEREST IN BUSINESS:
All the partners known that the reward for hard work and sincere efforts in the shape of better profit is to be shared by them only they understand that greater they work greater is the reward to them. This makes them to take sincere and personal interest in the operation of business.
6) FACILITY OF FORMATION:
Like sole proprietorship, a partnership can also be formed, without legal formalities and much expense.
7) DEFINITE LEGAL STATUS:
Partnership is established under law. Its entire activities right from its establishment through dissolution is governed by law; hence it has a definite legal status.