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Important facts about companies and businesses

A partnership can be defined as an association of two or more people who have agreed to combine their work, property and skill, or some or all, for the purpose of engaging in legal business and sharing profits and losses between them.

Partnerships present parties involved with special challenges that they must navigate to reach an agreement. Overall goals, give-and-take levels, areas of responsibility, lines of authority and succession, how success is evaluated and distributed, and often a variety of other factors must be negotiated. Once an agreement is reached, the society can generally be enforced by civil law, especially if it is well documented. Members who wish their agreement to be affirmatively explicit and enforceable usually draw up the Statutes of the Association.

A partnership is particularly attractive if it helps to pool the talents or abilities of the partners for their mutual benefit. Partnerships require compatible, honest, healthy, capable, dedicated, and equally motivated people to be successful. And due to the voluntary nature of partnerships, they are relatively easy to establish.

The term business in this definition includes all trades, occupations, and professions. Therefore, this article becomes very necessary for every individual to get the idea of ​​haggling / planning and negotiating at any kind of business level.

Humans are social beings, associations between individuals, companies, organizations based on interests, schools, governments and various combinations thereof, have always been and continue to be commonplace. In the most frequently associated instance of the term, a partnership is formed between one or more companies in which the partners (owners) collaborate to achieve and share profits and losses. There are associations within and between sectors. Nonprofit, religious, and political organizations can partner to increase the likelihood that each will achieve its mission and expand its reach. Sometimes considered an alliance, governments can partner to achieve their national interests.

A partner acts as an agent for the company in the conduct of its business. However, a partner must exercise the highest degree of good faith in all dealings with the other partners, devote time and attention to the business of the partnership, and must be accountable to the other partners for any secret benefits obtained in conducting the business. of the association. A partner’s liability for partnership debts is said to be unlimited, except when the partner is a limited partner in a limited partnership organized in accordance with the provisions of a state statute that allows such limitation of liability.

FORMATION OF ASSOCIATIONS

A company arises through a contract entered into by the interested parties. No formality is required, but the agreement can be written, inferred from conduct, or oral. The agreement to form a partnership is known as a “partnership contract”, the most important provision of which details how the profits will be distributed.

Associations are governed by the law of contracts. It is recommended that people who wish to form an association write what we call “Articles of Association”. The Article of Association essentially contains these elements below:

• Name of the association

• Name and addresses of each partner

• Statement of business objectives

• Duration of the association

• Name and location of the company

• Amount invested by each partner

• Profit sharing ratio

• Accounting records and their accessibility to partners

• Specific duties of each partner

• Provision or dissolution of company and participation in net assets.

• Provision for the protection of surviving partners, estate of the deceased, etc.

• Restricted to the assumption of special obligations by a partner.

TYPES OF PARTNERS

There are five types of partners:

1. Active member: – It is the member who participates in all the activities of the association.

2. Dormant or inactive member: it is the member who does not actively participate in the association’s activities, but shares the benefits.

3. Nominal Partner: – It is a person who lends his name to the partners for their consideration.

4. Secret partner: is a partner who actively participates in the affairs of the company, but is not known to the public as part of the company.

5. Silent Partner: – This is a partner who is known to the public as part of the association; but he does not actively participate in the management of the company.

ADVANTAGES OF THE ASSOCIATION

1. Greater source of capital: – The pooling of the individual resources of each partner helps to obtain a large capital. It makes it possible for a person with technical knowledge, a new product, an invention or a new idea, but without money, to work with a person with money who is interested in the project.

2. Greater specialized management: – Owning a business by two or more people allows them to pool their skills and judgment for the benefit of all concerned.

3. Greater incentive for employees: – Employees in partnerships tend to enjoy a better fringe benefits package and higher salaries. They have better prospects for recognition and promotions.

4. Legal recognition: – There is a company law that regulates the relationship between the partners themselves, and between the partners and their parties with whom they have to deal.

DISADVANTAGES OF THE ASSOCIATION

1. Personality clashes: – The partnership requires cooperation, trust and dedication, but the fact that one of the active partners does not fulfill his own responsibilities with diligence could lead to personality clashes and the end of the relationship. Partnerships are known to have ended because members were unable to agree on the best course of action to address an important issue.

2. Difficulty in withdrawals: – The contribution of each partner ceases to be the property of the person making the contribution. When a partner needs money, he cannot withdraw his contribution or borrow money from the partnership without the express permission of the other partners. Many entrepreneurs do not like this lack of flexibility characteristic of partnerships.

3. Unlimited liability: – Each partner is responsible for the obligations of the company. If one of the partners makes a costly mistake in executing the affairs of the partnership, the creditors can sue, and if they obtain a judgment against the partnership, each partner may have to sell their personal assets to comply with the requirements. obligations.

4. Short life span: – Factors such as death, prolonged ill health, retirement, bankruptcy, insanity or of some kind could lead to the end of society.

In conclusion, government-recognized associations can enjoy special benefits in tax policies. Among developed countries, for example, trade associations are often favored over corporations in tax policy, as taxes on dividends are only applied to earnings before being distributed to partners. However, depending on the structure of the corporation and the jurisdiction in which it operates, the owners of a corporation may be exposed to greater personal liability than they would be as shareholders of a corporation.

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