Did you know that the concept of sole proprietorship could limit your ideas, resources, connections and so on? However, business partnership will help you to eliminate this problem. Would you like to learn about the essential features of partnership in business? Continue reading to find out all the answers you need!
Business partnership – what is it?
Before discussing features of a partnership, it is necessary to know what business partnership is! The main feature of a partnership is the cooperation between at least two people who can be referred to as co-owners of business. Some businesses may simply hire different individuals to handle certain areas of their activities, while others can create limited liability and limited participation opportunities.
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Every partnership is designed as a form of cooperation; it has no separate entity which solely makes decisions like in the case of businesses with sole owners. The income tax, for instance, is paid by the partners and not by a sole individual. The profits and losses are also divided according to the agreement of business cooperation. Moreover, responsibilities are also mapped out and divided according to the agreements of the partners.
Therefore, if any problem arises, all individuals who are in this partnership will be responsible; this could be one of the drawbacks of partnership. Let us take a look at the full list of pros and cons in partnership!
Pros and Cons of business partnership
Pros:
- Easy to form (It is possible to create partnerships without any legal formalities).
- Greater capital resources.
- Skills and talents are provided by all members of the partnership.
- It enables division of labor which significantly increases the effective management of any business. For instance, every partner may take the positions they like in the business. Somebody can be responsible for the accounting while others can handle marketing and so on.
- More connections and contacts with clients.
Cons:
- Delay in decisions. Partners may not alway agree on some terms and strategies of their business. Therefore, the final decision will need some time to be formed!
- Division of responsibilities. It is almost impossible to trust people 100%, and this is true for any business model! Every partner in a business may be out to play his/her own game! Nonetheless, the consequences of the decisions made by each partner is suffered by all partners.
- Internal conflicts. If you want to lose a friend, start a business with him. In the long run, nobody is secured from internal conflicts. This is especially true when it comes to business.
- Unlimited liability. If you lose the game, you lose everything; this is especially true in partnership. If your partner makes a mistake, you also get to suffer from it. This means that creditors can also acquire your properties for debts owed if the need arises.
- Lack of Secrecy. It is almost impossible to secure the secrets of the firm if it has more than one owner. Therefore, the chances of making mistakes or losing money because of somebody`s inability to keep secrets are pretty high!
10 main features of partnership business
1. Agreement
The most basic feature of any partnership is agreement! You cannot create a partnership without an agreement. This agreement can be oral or written. Nonetheless, it will define the functions and responsibilities of every partner in the business.
2. Sharing of Profits
This is another key feature of a partnership. Every partner in the company gets a part of the profits. The profits can be shared according to the agreement between the partners. It may or may not be shared equally. Do not forget that partners of non-profit organization do not share any kind of revenues or profits amongst each other!
3. Number of Partners
A single individual cannot create a partnership, you will need at least two individuals for that.
4. No transfer of interests
Nobody in the partnership can transfer his interests according to his own wishes. This has to be done with the consent of other partners, otherwise, their actions can be considered illegal and the other partners may sue.
5. Mutual trust
It is almost impossible to create a partnership without mutual trust! Every partner in the company should do his or her best to provide maximum profits and revenues. Without trust, there is no reason to create a partnership.
6. Team Spirit
This is another essential feature of a partnership. You will need to create a team spirit if you want to promote your business and make profits.
7. Common Management
All partners should actively manage the company if they want their business to succeed! There is no other option!
8. Agency principle
All partners are considered agents of their business, therefore, they can all make contacts and invite more clients to their firms.
9. Unlimited liability
If something goes wrong in the business, everybody becomes responsible for it!
10. Capital contribution
Every partner contributes his own capital to the business. It is usually done in equal proportions.
Conclusion
If you want to create a partnership, you will need to understand the main features of a business partnership. Do not forget you need to choose partners you can trust; this is an essential part of any business decision!
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Source: Naija.ng
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