Topic 4 T2 (partnership)

Question 1

What is a partnership

Answer 1

• Not registered

- no partners depends on size and nature

Question 2

What are the characteristics of partnership

Answer 2

• A partnership is an agreement between two or more -persons.
• Each partner makes a contribution to the partnership.
• Partnerships are not legal entities.
• Partners are jointly and severally liable for the debts of the partnership.
• Profits and losses are shared among partners -according to the terms in the partnership agreement.
• The partners pay tax in their personal capacity.

Question 3

What are the advantages of sole proprietor

Answer 3

• Responsibilities of the partnership are shared by the partners
• Partners can specialize in that which they are best at.
• Expenses of the partnership are shared by the partners
• Partners can consult with one another before a difficult decision has to be taken.

Question 4

What are the disadvantages of sole proprietor

Answer 4

• Partners do not always agree.
• A bad decision by one partner can lead to losses for the partnership.
• Partners are bound by the decisions of other partners.
• There is no continuity.
• Partners have unlimited liability for the dept of the partnership.

Question 5

There are four essentials of forming a partnership

Answer 5

• Every partner must make a contribution.
• The business must be carried on for the joint benefit -of all the partners.
• The object must be to make a profit.
• The partnership contract must be legal.