Assessment 1 partnerships revision

Question 1

Do partnerships have limited or unlimited liability?

Answer 1

Unlimited liability

Question 2

Name what the Partnership Act 1890 states

Answer 2

1. Any profits or losses would be shared equally

2. No partner will get a salary

Question 3

What does the deed of partnership state?

Answer 3

• How the profits/ losses are to be shared
• The amount of capital each partner contributes
• If salaries are to be paid
• Is interest to be paid on capital
• Duties and responsible of each partner
• How new partners are introduced
• How the partnership can be dissolved

Question 4

Name three advantages of a partnership

Answer 4

• More capital is invested
• Each partner might bring in a specialist skill
• If one goes on holiday the business can carry on

Question 5

Name three disadvantages of a partnership

Answer 5

• Unlimited liability- Need to pay all of money owed
• All partners are liable for the losses
• Lack of continuity- if a partner dies the business may have to be dissolved

Question 6

What is a sleeping partner?

Answer 6

Someone who is not involved in the running of the business but invested capital and takes a share of the profits/pays for a share of the losses of the business