Theory question 107
Business Organisations(a) What is a partnership?
(b) State any two advantages and any two disadvantages of a partnership.
Show the model answer
Model answer
(a) A partnership is a business owned by two to twenty persons (up to fifty for professional firms) who contribute capital, share profits and losses, and run it under an agreement (partnership deed).
(b) Advantages (any two): more capital than a sole trader; division of labour and pooling of skills; shared risks and losses; easy to form; greater continuity.
Disadvantages (any two): unlimited liability (except limited partners); disagreements among partners; limited capital compared with companies; lack of continuity on death or withdrawal of a partner; slow decisions; shares cannot be transferred freely.
Explanation
Two of each, briefly explained.