FOIRMATION OF PARTNERSHIP BUSINESS


A RESEARCH PAPER

In

English 2-A3-2(College English II)
English Department, CASS
MSU-IIT,Iligan City


Submitted to
Prof. Lennie Ann Deocampo

By
Juhairah D. Ibrahim

MARCH 2010




Topic: formation of partnerships business
Thesis statement: people who engage in business partnerships must consider some legal issues involved in this form of business.
I. Introduction
A. When the business expands to a greater extent, the business necessitates a combination of money, skill and working experience.
B. People who will engage in partnership form of business must consider some legal issues involved in this form of business.
II. Body
A. Partnership as a form of business organization is an association of two or more person that grew out of the limitation of individual proprietorship.
1. The partnership has juridical personality separate and distinct from that each of the partner.
2. Partnerships are often formed to bring together various talents and knowledge.
B. There are some partnership issues that business men must handle to make a partnership successful.
1. Informality and ease formation of partnership most likely results to disputes and law suits between owners.
2. Unlimited liability is the greatest drawback of partnerships business.
i. Unlimited liability refers to the limitless extent of partner’s liability in operating the business.
ii. Most partnership business end with bankruptcy of the owner due to unlimited liability.
3. Mutual agency in partnerships is the major reason of un successful management in this form of business.
i. Mutual agency refers to the authority of each partner to be an agent of other partners and at the same time of the firm.
ii. Disharmony and conflicts of personalities, ideas and interests among partners led to the downfall of the business.
iii. Managerial difficulties cause injury and create trouble to the firm.
C. People who will engage in partnerships business should recognized its pitfalls in advance to have a good idea of the work require to make the business partnership successful.
III. Conclusion
A. Some characteristics of partnerships as legal form of business make it less effective in operating successful business.
B. Anyone who enters into partnership business should recognize pitfalls of this type of entity in advance.






Introduction
Did your parents’ marriage work?
Or do you wish to have a successful marriage?
Megan and Matt sat tentatively on two of the upholstered chairs in a counseling center. They had moved the chairs close enough to hold hands tenderly as the conversation began. Their surprise, and perhaps embarrassment, at finding themselves in marriage counseling seemed evident not only from the subdued manner in which they spoke but also in the way they look each other.
Theirs had been almost a storybook wedding. Matt was a returned missionary, and Megan was the faithful sweetheart who waited. They had maintained their worthiness during their engagement and enjoyed the blessing of a temple on their wedding day.
What had gone wrong?
Matt and Megan, and others like them find out their relationship not working. It has been suggested that more marriages die of neglect than of sin. Neglect of each other and of the marriage relationship seems to be the primary cases like Matt and Megan’s.
Nowadays modern lifestyle and practices relating to marriage are not working. The present divorce rate has skyrocketed to an astounding 50%, approximately.
There are number of things that results to divorce. Most couples sense their relationship drifting apart because some pitfalls they encounter. Some couple tries to mend their marriage and recapture their joys of earlier times.
Making a marriage work involves handling volatile mix of partnership issues just like getting into a business partnership. Getting into partnership relates to getting marriage where handling issues in partnering make sense to ensure survival of the marriage or success of the business.
What does partnership means?
How business partnership issue affects business success?
What things should the partner consider in this relationship?













Body
Partnership or firm as it is often called is the 2nd stage in the evolution of business organization. As a form of business organization, it grew out of the limitations of individual proprietorship. In sole proprietorship, the financial resources, managerial skill, and risk bearing capacity are limited. When business activities of sole proprietorship business expand, a need for more capital and more persons to supervise the business affairs arises.
To overcome the drawbacks of sole trading organization and to meet the .expanding needs of a business requiting a moderate amount of capital, partnership form of business was developed. Here two or more persons form partnership by making a written or oral agreement that they will jointly assume full responsibility for the conduct of business.
According to Straub and Attners, partnerships are created to pool talents and to provide a base support for each of the individual who wish to enter a business but do not want to go it alone. Thus, partnership is defined as the relationship between persons who agree to carry on a business in common in view of private gain (Ballada, 2010).
Consider the following language from the uniform partnership act:” association of two or more person to carry on as co- owners of business for profit forms a partnership whether or not the persons intend to form partnership.” A partnership—in its various forms—offers its multiple owners flexibility and relative simplicity of organization and operation. Thus, it is a business form created automatically when two or more persons engage in business enterprise for profit.
Two things make this type of entity unique:
First, it has a juridical personality separate and distinct from that of each of the partner (civil code of the Philippines, article1768). The persons who form a partnership are individually known as partners and collectively as firm. Thus, for example, where Fabella and Neis established a partnership, three persons are involved, namely: the partnership, Fabella and Neis.
Second, partnerships are often formed to bring together various talents and knowledge. It is often represented by pooling of special talents particularly in such field as law, accounting, advertising, real state and retailing. In this form of organization, people can pool their knowledge and skills to operate effectively than one person might. For example, one partner can provide management expertise while the other provides marketing skills (Straub and Attner, 1998).
Business partnerships have been an important part of entrepreneurship and startup success. The reasons are simple: complementary skill sets, shared equipment or expenses, and idea that one person with hard money capital can create synergy with the intellectual capital of another person so both can profit from their venture.
But there are still issues they must consider in advance.
These are the partnership issues that commonly result to pitfalls of the entity. These issues are as follows:
Because of its informality and ease formation, the partnership is the most likely business to result in disputes and lawsuits between owners.
Most important issue in partnerships is the partners’ liability in this arrangement. This is the greatest draw back in this form of business which is known as unlimited liability..
Unlimited liability refers to the limitless of partner's liability in operating this type of entity.
In essence, the liability of a partner is significantly large. If any partner incurs business debts with or without the knowledge of others, partners are still held liable for the debts. Simply, each partner is his brother’s proverbial keeper and will be responsible both legally and financially for the action of the other partners in the general course of business. To give clear example, where one partner acts negligently and is no indemnity insurance, the liability of all partners will be joint and several. The cause of major stress arises where the other partners become insolvent. The weight of the total liability would rest on the solvent partners. Thus, put simply, even if a person only had 25% partner share, he/she would be responsible for covering all 100% of the damage arising from the negligence if the other do not have the means to pay (Elbert and Griffin, 1995).
Mutual agency is common to all partnership. This refers to the authority of each of them to be each other agent. Thus, the business of partnership may be carried on by all the partners or any one of them acting for all. Thus, every partner is an agent of the other partners and at the same time of the firm. Any partner can bind the other partner to a contract if he is acting within his express or implied authorities.
This may create two major problems in managerial of firm.
First, because partners have scant of knowledge of each other characteristics before they begin business, it is not surprising that conflicts of personalities, ideas, and interest among partners arise and can be the downfall of the business. This is what experts called disharmony which easily arises to this type of entity, and because each partner has the right to make decision for the firm, the business can become a good illustration of the adage that “too many cooks spoil the broth” (Hodgett, 1981).
Second, managerial difficulties cause injury to the firm since everything is governed by agreement of partners. Important decisions are delayed until all the partners are present on the spot for discussion and consultation. More over, interruption into day-to-day affairs by every partner may create trouble in the firm policies and duties.
As a result of these issues, business partnerships are not proved as popular as the other type of business. Majority of such partnership do not succeed in reality. In the recent years, only 7% of all businesses are partnership.
Those who think that divorce rate is high should look at the statistic for business partnerships before entering to this type of business. Business marriages, like personal ones, can fall apart quickly and with little warning.
Businessmen in this type of business relationship into should consider the pitfalls attach to this type of entity to insight how to better manage this relationship to ensure success.














Conclusion
In the theory, a partnership is a great way to start in business. However, it’s not always the best way for the typical entrepreneur to organize a business.
Tough thing about most partnerships is that they are just like marriages, and if you know anything about those statistics, you know half of all marriages don’t survive. Making marriage work involves handling a volatile mix of partnership issue: ego, money, and stress, monthly overhead and day-to-day expenses just like in a partnership business. Throw in some employees, you must manage, and you have a good idea of the work required to make a business partnership successful.











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