Partnerships (Introduction) Part 2 Flashcards
What are the advantages of a partnership?
- Protected and regulated by law
- Unlimited Liability of the partners is positively viewed by the creditors
- Higher capital raised & better management than sole proprietorship
- Easier to organize and more freedom in decision-making than in corporations
What are the disadvantages of a partnership?
- Easily dissolved
- Unlimited Liability may prevent potential partners from investing
- May be subject to personal liability
- Mutual consent is needed to transfer ownership interest to other parties
- More regulatory requirements than sole proprietorship
- Cannot raise large amounts from public sources, unlike in corporations
What are the classifications of a partnership?
- As to activities or purpose
- As to duration
- As to publicity
- As to legality of existence
- As to representation of others
- As to liability of partners
- As to object
What are the different types of partners?
- As to contribution - capitalist and industrial partners
- As to liability - limited and general partners
- As to management - managing and silent partners
- As to knowledge of the public and as to management - ostensible, silent, secret, and dormant/sleeping partners
What are capitalist partners?
Contributes cash and non-cash properties
What are industrial partners?
Contributes industry (employees, expertise, knowledge, resources, etc.) to the partnerships
How many general and limited partners are required in the following partnership?
A. General partners = At least one in a general partnership; None in a limited partnership
B. General partners = None in a general partnership; At least one in a limited partnership
C. Limited partners = At least one in a general partnership; At least one in a limited partnership
D. Limited partners = None in a general partnership; At least one in a limited partnership
D. Limited partners = None in a general partnership; At least one in a limited partnership
What are general partners?
They are unlimited partners. They are liable for partnership debts that extends up to their personal assets.
What are limited partners?
They are limited partners. They are liable for the partnership debt limited to one’s contributed capital.
What is a managing partner?
Actively participates in the management and operations of the partnership
What is a silent partner?
Does not actively participate in the management and operations of the partnership
What is an ostensible partner?
Known to be a partner and actively participates in the management and operations of the partnership
What is a silent partner?
Known to be a partner but does not actively participates in the management and operations of the partnership
What is a secret partner?
Not known to be a partner but actively participates in the management and operations of the partnership
What is a dormant partner?
They are sleeping partners, not known to be a partner and does not actively participates in the management and operations of the partnership
What is a trading partnership?
It is a commercial partnership. Makes use of merchandising and manufacturing
What is a non-trading partnership?
Renders services and is a professional partnership
What is the duration of a partnerships’ existence when partnership is at will?
It exists indefinitely under the Articles of Partnership.
What is the duration of a partnerships’ existence when partnership is at a fixed duration/term?
It exists within the time frame agreed upon.
What is a secret partnership?
It is when at least one partner is not made known to the public
What is an open partnership?
It is when all partners are made known to the public
What is the partnership’s legality existence of De jure?
It has complied with all the legal requirements for its existence
What is the partnership’s legality existence of De facto?
It has not complied with some or all of the legal requirements in its formation
