(a) What is a partnership? [4 marks)
(b) State any two advantages and any two disadvantages of a partnership [16 marks]
Explanation
(a )A partnership is a form of business organization in which between two and twenty individuals enter into an agreement, to run a business.
(b) Advantages of a partnership are.
(i) Individuals pooling resources together can generate more capital.
(ii) It is easier to specialize, since each of the partners may bring different skills and expertise Into the business.
(iii) Two heads are better than one and so decisions could be more rational.
(vi) Where there are many partners, the death of one of the partners may not mean the end of the business.
(v) Privacy in conducting business.
Disadvantages are:
(l) Capital is still relatively limited as it cannot float shares. Capital depends mainly on the resources of the partners.
(ii) Decision making is difficult as the partners sometimes disagree.
(iii) Depending on the number of partners, the death of one partner may result in the collapse of the business
(iv) When there is a debt the partners may lose not on y the capital they have invested in the business but other properties as well Liability is unlimited.
(v) It is not a legal entity
(vi) The activities of one partner may ruin the organization.