ZIMSEC O Level Commerce Notes: Partnership Features
- Is formed by written or verbal agreement between partners.
- They are formed by 2-10 partners.
- Professionals such as lawyers, doctors and accountants can form partnerships of 2 to unlimited members as they are not allowed to form limited liability companies.
- Has fewer legal formalities.
- Requires a trading licence.
- Is governed by the Partnership Act or a where it exists a Partnership Deed.
- It is jointly owned and controlled by the partners
- Active partners control the business’s day to day operations.
- Sleeping partners contribute capital only and do not manage the business.
- Decisions made by one partner are binding on all the other partners.
- The liability of the partners is usually unlimited.
- General partners have unlimited liability.
- Limited partners have limited liability.
- Profits and losses are shared either equally or according to the provisions of the Partnership Deed.
Types of partners
- All partners have unlimited liability of the partnership’s debts which means that they can lose their own personal property in settlement of partnership debts.
- Active partners take part in the day to day running of the business.
Limited liability partnership
- Limited liability and sleeping/dormant partners:
- contribute capital only.
- Enjoy limited liability.
- Do not take part in the day to day running of the business.
- The Partnership Act requires that at least one of the partners in a Limited Liability partnership should have unlimited liability:
- The active partner must run the business on a daily basis.
- Bear the unlimited liability.
Sources of capital
- From their own personal savings.
- From family and friends.
- Loans and overdrafts from commercial banks.
- Mortgage loans from Building Societies.
- Retained Earnings.
- Hire Purchase buying.
- Leasing of fixed assets.
- Purchasing goods for resale on credit.
To access more topics go to the Commerce Notes page.