SS1 Commerce Lesson Note on Partnership

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TOPIC: PARTNERSHIP

CONTENT

• Meaning of Partnership
• Types of partnership – normal, dormant, limited, etc.
• Formulation and agreement.

SUB-TOPIC 1: MEANING OF PARTNERSHIP

Partnership is an association between a minimum of two and maximum of twenty members coming together to undertake a/some businesses) in order to make profit. The partnership Act 1890   defined partnership as the relationship which subsists between persons carrying on a business in common with a view of profit. Partnerships are also known as firms. The law allows this type of business to have between two and 20 persons as members although there are exceptions. A bank is not allowed to have more than ten partners and certain professional firms such as accountants, solicitors and stockbrokers are allowed to have more than 20 partners. Examples are Femi and Shade Enterprises, Diya Fatimilehin and Co; (estate firm).

FEATURES OR CHARACTERISTICS OF PARTNERSHIP

1. Ownership: Membership is limited and is from two to twenty.
2. Objective: The main aim of forming this type of business organization is to make profit.
3. Source of capital: The partners contribute the capital required for starting and running the business.
4. Unlimited Liability: Members of a partnership have unlimited liability for the debts of the firm.
5. Life span: The duration of the business depends on the agreement signed by the partners involved.
6. Legal entity: It is not a legal entity as the partners are not separated from the business.
7. Management: The business is controlled and managed by the partners.

EVALUATION

1. Explain the meaning of partnership
2. Identify five features of partnership

SUB-TOPIC 2: TYPES OF PARTNERSHIP

1. Limited Partnership:

This is a type of partnership which is formed and registered under the limited Partnership Act.  In a limited partnership, there must be one general partner with unlimited liability and one limited partner whose liability is limited to the amount invested into the business. The partners do not take equal part in management and administration of the business.

2. General or Ordinary Partnership

This is the opposite of limited partnership where the members who formed the business have the equal rights and responsibility in the administration of the business. Every partner is jointly liable to the full extent of the debt of the firm. The liability of members is unlimited, which means that all partners are liable to the full extent of the debts of the firm.

TYPES OF PARTNERS

1. Limited Partners: A limited partner is one who has agreed to contribute a certain sum to a partnership business and is prevented by law from taking any active part in the management and administration of the business. He has limited liability.
2. General Partners: This type of partner has full power of participating in the conduct and management of the partnership business. A general partner has unlimited liability and binds the firm. Death or bankruptcy of this partner leads to the dissolution of the partnership.
3. Active Partner: An active partner participates actively in the day to day running of the firm and is being paid a certain sum as salary. He contributes to the financing and formation of the business.
4. Nominal or Quasi Partner: A nominal partner contributes only his name to the formation of the business. He neither contributes capital nor takes part in the management of the firm.
5. Sleeping or Dormant Partner: A dormant partner takes no part in the conduct and management of the partnership business. He contributes capital and share from the profit but receives no salary. A sleeping partner is liable for the debts of the firm.

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