Preview

Partnerships

Satisfactory Essays
Open Document
Open Document
279 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Partnerships
STUDY UNIT 2: ESTABLISHMENT AND FINANCIAL STATEMENTS OF A PARTNERSHIP
PARTNERSHIP

- A partnership is a legal relationship which arises when an agreement is entered into by two to twenty people. Each partner contributes something – cash, assets, knowledge etc to the business with the aim of making a profit which is shared according to an agreement.

2.2 Reasons for forming partnerships

o To increase the amount of capital in the business o To eliminate competition o To bring capital and technical expertise together.

2.3 Legal position of a partner

Partners are joint bearers of the rights of the partnership and are jointly and severally liable for the obligations and debts of the partnership. In South Africa there is no specific legislation which pertains to partnerships.

The operations of partnerships are mainly conducted according to common law.

o A partnership is not a legal entity so the partnership does not pay tax, but the .. partners do pay tax.

2.4 Establishment of a partnership

There are two ways of establishing a partnership.

A. ACTION – It is possible to establish a partnership by agreement. This implies that if the actions (conduct) of two or more people are such that they give rise to the assumption that the people are in partnership, then a partnership is automatically established between them.
B. AGREEMENT – A partnership is established when people agree in words to form a partnership.

2.5 The partnership agreement

There are no formal requirements but it is desirable to draw up a written agreement between/among partners.

• Some details should include
 Capital contributions
 Profit sharing ratios
 Interest on capital, current and drawing account
 Partnership’s salaries and bonuses
 Withdrawals by

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Why do people choose LLC?

    • 717 Words
    • 3 Pages

    “A partnership can be defined as an association of two or more competent persons to carry on a business as co-owners for profit. To help understand this definition, we will break it down and look at the individual clauses.”…

    • 717 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    Work In Partnership

    • 1804 Words
    • 6 Pages

    A partnership is an arrangement between two or more groups, organizations or individuals to work together…

    • 1804 Words
    • 6 Pages
    Powerful Essays
  • Powerful Essays

    Partnership

    • 7850 Words
    • 61 Pages

    1784. A partnership begins from the moment of the execution of the contract, unless it is otherwise stipulated. EXCEPTIONS: 1. Where immovable property/real rights are contributed (Art. 1771) a. Public instrument is necessary b. Inventory of the property contributed must be made, signed by the parties and attached to the public instrument otherwise it is VOID 2.…

    • 7850 Words
    • 61 Pages
    Powerful Essays
  • Satisfactory Essays

    Partnership means that, a group of skilled professionals can fuse their talents and expertise together to form one successful company. Only these professionals are the owners and stockholders for the company. Each professional will than be a partner of that particular company and receive a percentage which is based on how much money the partner invests into the company, the significance and importance of the partners skill and experience, and so on.…

    • 337 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    A partnership is a company that is maintained by more than one individual. For an organization to be titled a partnership the establishment must have one or more proprietors that have not filed their articles of incorporation in the state to convert into a corporation. If all proprietors have filed it then the business is now a corporation or LLC. In a partnership, every proprietor is accountable for all debts, and is responsible for every transaction in the firm.…

    • 574 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Res 351 Week 1

    • 881 Words
    • 4 Pages

    A partnership involves two or more people. When a partnership is formed, a legal agreement is usually prepared to detail the contributions or investments of each partner, the responsibilities of each partner, the distribution of profits and losses, and the terms to follow should the partnership dissolve.…

    • 881 Words
    • 4 Pages
    Satisfactory Essays
  • Powerful Essays

    P4 & M2

    • 4018 Words
    • 17 Pages

    Partnership- A type of unincorporated business organization in which multiple individuals, called general partners, manage the business and are equally liable for its debts; other individuals called limited partners may invest but not be directly involved in management and are liable only to the extent of their investments. Unlike a Limited Liability Company or a corporation, in a partnership each partner shares equal responsibility for the company 's profits and losses, and its debts and liabilities.…

    • 4018 Words
    • 17 Pages
    Powerful Essays
  • Satisfactory Essays

    A partnership is a business where there are two or more persons. Partnerships are usually business that don’t last long either like sole proprietorships. When two people need to make business decisions regarding their business many conflicts can arise. This is the number one reason why partnerships end up getting dissolved and business either get closed down or sold to someone else.…

    • 260 Words
    • 2 Pages
    Satisfactory Essays
  • Best Essays

    Parent Partnership

    • 3982 Words
    • 16 Pages

    I define partnership as an agreement between two or more parties that have agreed to work…

    • 3982 Words
    • 16 Pages
    Best Essays
  • Good Essays

    Partnerships are businesses started by 2 or more individuals. In this form of business each individual is equally responsible for the liabilities, management, as well as entitled to a portion of the profits. With the different knowledge and skills each member brings to the business will increase the chance of success.…

    • 822 Words
    • 4 Pages
    Good Essays
  • Better Essays

    Legal Forms of Business

    • 1405 Words
    • 6 Pages

    A partnership is a form of business which is somewhat similar to sole proprietorship but with two or more owners. Just like sole proprietorship, the partnership is inseparable from its owners, which means the name is different otherwise the owners are representing themselves in public. However, in a partnership, each partner can be held responsible for the actions of the other partners and partnership can hold property and incur debt in its name (Lee, 2011)…

    • 1405 Words
    • 6 Pages
    Better Essays
  • Good Essays

    A partnership is an arrangement between two or more groups, organizations or individuals who work together to achieve common aims or who have common interests.…

    • 1075 Words
    • 5 Pages
    Good Essays
  • Good Essays

    One of the advantages of a partnership over a proprietorship is the increased sources of capital and credit it offers.…

    • 367 Words
    • 2 Pages
    Good Essays
  • Good Essays

    Working In Partnership

    • 287 Words
    • 2 Pages

    The partnership will work over a period of time, all involved will agree that the partnership is necessary and have a common goal or aim to achieve.…

    • 287 Words
    • 2 Pages
    Good Essays
  • Better Essays

    Coach Inc Research Paper

    • 1280 Words
    • 6 Pages

    7. Partnership - An arrangement in which parties agree to cooperate to advance their mutual interests.…

    • 1280 Words
    • 6 Pages
    Better Essays