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Partnerships

ArticleID 72  
Writer Grace Odinga
Category Personal Article



If two or more individuals decide to share the responsibilities and profits of operating a business, they have formed a partnership. Each partner contributes money, property and labor and in turn the partners share in the profit and losses of the business.


A partnership can be forged by agreement between the partners when they want to use their personal names to constitute the name of the firm. If the partners want to use a name different from their own, the firm’s name must be registered with the Registrar General’s office. A partnership can be permanent or temporary. A Permanent partnership is intended to continue indefinitely. This means that the date of termination is not known at the time of formation. A temporary partnership is formed for either a specific purpose or period. Upon the expiry of such a purpose or period the partnership is automatically dissolved.


There are two categories – general and limited partnerships.


In a general partnership, each partner is personally responsible for all the debts and liabilities of the firm. This amount could very easily exceed the sum he or she has invested in the business and could lead to personal bankruptcy. Each partner may be held responsible for the acts of the other partners if he or she represents the business at the time of action.


On the positive side, sharing the ownership of the business is one way to obtain sufficient financing for the enterprise. You may lack technical or management skills that are basic to the business. Finding a partner with these skills could be the best way to cover this deficiency. The selection of a partner could be one of the most important decisions you will make; base the decision on logic, not on emotion. In a good general partnership, each member contributes an element of expertise that the others do not have and each can see how his or her work is important to the business.


A limited partnership is made up of one or more general partners and one or more limited partners. The general partners are responsible for all debts and liabilities of the business, while the limited partners are responsible only for the amount of their investment. This option can attract investors who do not wish to be part of the day-to-day operation of the business.


Writing a partnership agreement is strongly recommended for any partnership. It can specify the duties of each partner, indicate how profits/losses will be shared and cover the ‘what if’ situations that may be encountered when more than one person runs a business. A written agreement prepared with the help of an attorney can prevent misunderstandings among partners in later years; verbal agreements may be subject to different interpretations, especially after a few years have passed.


Partnerships, Starting a Business, Owning a Business, Entrepreneur, Entrepreneurship
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