Week 5 Quiz - Essay

1.
Discuss the Advantages and Disadvantages of Partnership

Advantages
Easy to form: A partnership firm can be formed without any legal formalities and
expenses. Even if the firm is to be registered, the expenses are not much compared to
company form of organization.
Improved Growth Possibilities: You can meet lots of people who had their own
following and offerings, spot the synergy quickly and propose a partnership plan that
helped grow all of our businesses. By partnering up with like-minded entrepreneurs, we
could use our collective networks to fill events, gain subscribers and offer new products.
Freedom from Bureaucracy: argues that as a form of advanced liberal power,
partnerships work not primarily as direct domination and imposition, but through
promises of incorporation and inclusion. They derive their power through simultaneously
excluding and incorporating, and by using freedom as a formula of rule partnerships
help produce modern, self-disciplined citizens and states by enlisting them as
responsible agents in their own development.
Disadvantages
Instability: On similar lines, by default, a partnership is dissolved as soon as one of the
members dies, retires, resigns, files for bankruptcy, or otherwise quits. This can mean a
sudden and unexpected end to a profitable business. A corporation, on the other hand,
requires many more steps to be undertaken in order to end its existence, which makes
its existence much more predictable.
Difficulty in obtaining large sums of capital: A partnership would face difficulty in
obtaining a large amount of loans from financial institutions as it is considered to be
riskier. Partnerships may Not be able to raise capital like corporations as they have no
access to share markets.
Firm is tied to the acts and judgment of one partner as agent: There is a possibility
that a general partner could undertake a contract which may put the firm in a disastrous
situation, including other partners. The other partners are than liable for the action.
Difficulty in severing partnership ties: Since a partnership dissolve when there is a
change in ownership, it tends to be difficult to transfer ownership. It is a complicated
process when a new partner is added or a partnership interest is sold, requiring asset
valuation and negotiation of previously agreed upon partnership operating terms.
2. Differentiate General Partnership with Limited Partnership?

A general partnership is one in which all of the partners have the ability to
actively manage or control the business. This means that every owner has authority to
make decisions about how the business is run as well as the authority to make legally
binding decisions. Unless the partners have a partnership agreement, each partner will
have equal authority. Partners in a general partnership don't have any limit on their
personal responsibility for the debts of the business. This means that the partner could
lose more than just his investment in the business - personal assets would have to be
used to pay business debts if necessary. Each partner in a general partnership is also
"jointly and severally" liable for debts of the business. Joint and severable liability
means is that each partner is equally liable for the debts of the business, but each is
also totally liable. So, if a creditor can't get what he is owed by one or more of the
partners, he can collect it from another partner, even if that partner has already paid his
share of the total debt. If someone sues your partnership and obtains a large judgment,
and your partner doesn't have the money to pay his share of it, you will have to pay the
entire amount.
A limited partnership is different from a general partnership in that it requires a
partnership agreement. Some information about the business and the partners must be
filed with the appropriate state agency (usually the secretary of state).
Additionally, a limited partnership has both limited and general partners. A limited
partner is one who does not have total responsibility for the debts of the partnership.
The most a limited partner can lose is his investment in the business. The tradeoff for
this limited liability is a lack of management control: A limited partner does not have the
authority to run the business. He is really more or less an investor in the business.
A limited partnership must have at least one general partner. The general partner or
partners are responsible for running the business. They have control over the day-to-
day management of the business and have the authority to make legally binding
business decisions. The partnership agreement will specify exactly which partner or
partners have certain responsibilities and which have certain authority. General partners
are also subject to unlimited personal liability for the debts of the business. The general
partners of a limited partnership are also jointly and severally liable for the debts of the
business, just like partners in a general partnership.
3.Discuss what makes a Corporation different from a Partnership.
The main difference between a partnership and a corporation is the separation between
the owners and the business. Corporations are separate from their owners, but in
partnerships, owners share the business's risks and benefits.
A corporation, on the other hand, is owned by shareholders. It can be for-profit or
nonprofit. For-profit corporations reinvest profits in the business and pay out dividends
to shareholders.
Partners in a partnership are at risk if something goes wrong with the business.
Corporate shareholders are generally protected.
It's easier to set up a partnership because it has fewer legal requirements, less
paperwork, and fewer tax obligations.

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1.

Discuss the Advantages and Disadvantages of Partnership

2. Differentiate General Partnership with Limited Partnership?

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