Page 1 - LN5
P. 1

SAI INTERNATIONAL SCHOOL


                                                       CLASSS XI

                                            SUBJECT: BUSINESS STUDIES


                                      CHAPTER -2, BUSINESS ORGANISATION

                        CH 2 Lesson Notes 5 Partnership, Features, Merits, Demerits and Types


               Meaning: Partnership  is a voluntary association of two  or  more  persons  who  agree  to  carry  on
               some business jointly and share its profits and losses.

               FEATURES

               1. Two  or more persons: There must be at least  two persons to form a partnership. The maximum
               no. of persons is 10 in banking  business and 50 in non-banking  business.
               2. Agreement: It  is  an outcome of an agreement among partners which may be oral or inwriting
               and  that  partnership  agreement  is  called  as partnership deed.                                                      3.
               Lawful business: It can be formed only for the purpose of carrying on some lawful business.it means
               the business should not be carried on any  illegal business.
               4. Decision making & control: Every partner has a right to participate in management & decision
               making of the organizations.
               5. Unlimited liability: Partners have unlimited liability. It implies that if the assets of the firm are not
               sufficient to meet the obligations of creditor of the firm, the personal assets of the partners can be
               attached to pay the outstanding dues.
               6. Mutual Agency: Every partner is an implied agent of the other partners and of the firm. Every
               partner is liable for acts  performed by other partners on behalf of the firm.
               7. Lack of continuity: Firms existence is affected by the death, Lunacy and insolvency of any of its
               partner. It suffers from  lack of continuity.


               MERITS

               1. Ease of formation &closure: It can be easily formed. Only an agreement among the partners is
               required.

               2.Larger financial resources: There are  more funds as capital is contributed by no. of partners. So as
               compared  to  sole  proprietorship  and  HUF  Business,  the  financial  resources  of  a  partnership  are
               large.

               3.  Balanced  Decisions:  As  decisions  are  taken  jointly  by  partners  after  consulting  each  other.  So
               there is better decision making in partnership as decision made after considerable discussion among
               partners.
               4. Sharing of Risks: In the partnership risk gets distributed among partners which reduces
               anxiety, burden and stress on individual partner.

               5. Secrecy: Secrecy can  be  easily  maintained  about  business  affairs  as  they  are  not  required  to
               publish their accounts or to file any report to the govt.
   1   2   3   4