(a) Explain to a group of Sole Proprietors who wish to form a partnership any seven problems they are likely to face.
(b) State three conditions suitable for the formation of partnership business.
(b) State three conditions suitable for the formation of partnership business.
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Correct Answer: Option n
Explanation:
(a) Problems of partnership include:
(i) Unlimited liability: The partners are liable to the debts of the business to no limit.
(ii) Difficulty in management: Decision-taking is going to be long and slow as every partner would want their voice to be heard, thus, creating disagreement.
(iii) Inability to raise sufficient capital: Partners cannot invite the public to raise capital, and because of its unlimited liability, members fear to invest in partnership.
(iv) Risk of dissolution: The partnership stands dissolved at the death, bankruptcy or insanity of a member
(v) Action of one partner on others: There is the danger that one reckless partner can ruin others.
(vi) Partnership profits have to be shared among members; some may get more than the other.
(vii) Success of partnership depends on the ability of partners to work as a team.
(viii) The growth of the business is limited to the managerial abilities of the partners.
(b) Conditions suitable for the formation of partnership are:
(i) Large amount of capital is necessary for the business as a limited company.
(ii) The success of the business requires the skill or knowledge of experienced members of the partnership/joint decision, for example, solicitors, doctors, etc.
(iii) The ownership and control should not be extended outside a family or friends.
(iv) Partnership is suitable for executing short term venture.
(a) Problems of partnership include:
(i) Unlimited liability: The partners are liable to the debts of the business to no limit.
(ii) Difficulty in management: Decision-taking is going to be long and slow as every partner would want their voice to be heard, thus, creating disagreement.
(iii) Inability to raise sufficient capital: Partners cannot invite the public to raise capital, and because of its unlimited liability, members fear to invest in partnership.
(iv) Risk of dissolution: The partnership stands dissolved at the death, bankruptcy or insanity of a member
(v) Action of one partner on others: There is the danger that one reckless partner can ruin others.
(vi) Partnership profits have to be shared among members; some may get more than the other.
(vii) Success of partnership depends on the ability of partners to work as a team.
(viii) The growth of the business is limited to the managerial abilities of the partners.
(b) Conditions suitable for the formation of partnership are:
(i) Large amount of capital is necessary for the business as a limited company.
(ii) The success of the business requires the skill or knowledge of experienced members of the partnership/joint decision, for example, solicitors, doctors, etc.
(iii) The ownership and control should not be extended outside a family or friends.
(iv) Partnership is suitable for executing short term venture.