39 18310 advantages partnerships there are many

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any money they owe to the firm has been deducted – s. 39). 18.3.10 ADVANTAGES PARTNERSHIPS There are many advantages arising from doing business as a partnership. One advantage is the ease of formation. Since setting up of a partnership does not require any particular formality, it is very easy to start it. In addition, there is minimal statutory regulation in the manner in which a partnership runs its business and in the publication of its activities and accounts. These afford partnerships relative privacy. Another advantage of partnerships is equality on which the relationship of the partners is based. Unless the partnership agreement stipulates otherwise, every partner is entitled to participate equally in the contribution of capital, in the share of profits, and in the management of the business. To this end, no partner can be expelled by the majority of partners unless the power to do so had been included in the partnership agreement – s. 25. This gives every partner equal stake and control in the business. It also means that the partners are likely to be more committed to the success of their business than they would be otherwise. Partnerships afford flexibility to the partners and the firm. Although the provisions of the Partnership Act 1890 are applicable to partnerships, they are essentially based on contract willingly agreed to by the partners. The partners in any firm are free to configure their business as it would suit them best. The Partnership Act 1890 and the terms implied in it apply only where there are no partnership contracts or provisions relating to particular matters. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 348 PARTNERSHIPS Moreover, because partnerships can involve any number of persons, partners could finance their business from different quarters. This gives them more scope to grow than a sole proprietorship. Moreover, since partners may come with different abilities, skills and connections, the human resources available to a partnership could be considerable. 18.3.11 DISADVANTAGES OF PARTNERSHIPS A partnership has a number of disadvantages, including the absence of separate legal personality and perpetual succession, and the unlimited liability of partners. For all legal purposes, a firm is not different from the partners. For this reason, debts owed by the firm are deemed to be owed by the partners, and wrongdoings of the partners in the course of business are deemed to be those of the firm. Moreover, every partner is deemed to be an agent of the firm and can bind them to contract even in breach of the partnership agreement. Partners are fully liable for their firm’s debts. Any debt owed by the firm could be satisfied from the personal finances or assets of the partners. In this respect, a partnership is similar to a sole proprietorship. This is one of the main drawbacks of traditional partnerships. Since a partnership has no separate legal personality, there is no automatic perpetual succession of membership; and a beneficiary cannot automatically inherit the interest of a partner. This
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