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Questions and Answers
What is the primary objective of a partnership firm?
What is the primary objective of a partnership firm?
What is the minimum number of persons required to form a partnership firm?
What is the minimum number of persons required to form a partnership firm?
What is a characteristic of a partnership firm?
What is a characteristic of a partnership firm?
What is shared by partners in a partnership firm?
What is shared by partners in a partnership firm?
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What is the liability of partners in a partnership firm?
What is the liability of partners in a partnership firm?
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What is a type of partnership where partners can dissolve the firm at any time?
What is a type of partnership where partners can dissolve the firm at any time?
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What is a disadvantage of a partnership firm?
What is a disadvantage of a partnership firm?
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What is an advantage of a partnership firm?
What is an advantage of a partnership firm?
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Study Notes
Partnership Firm
Definition
- A partnership firm is a form of business organization where two or more persons come together to carry on a business with the aim of earning profits.
- It is a voluntary association of individuals who join hands to carry on a business activity.
Characteristics
- Voluntary Association: Partners come together voluntarily to form a partnership firm.
- Two or More Persons: A minimum of two persons are required to form a partnership firm.
- Business: The primary objective of a partnership firm is to carry on a business activity.
- Sharing of Profits and Losses: Partners share profits and losses in a predetermined ratio.
- Unlimited Liability: Partners have unlimited liability, meaning their personal assets are also at risk in case of business losses.
Types of Partnership
- Partnership at Will: A partnership where partners can dissolve the firm at any time by giving notice to the other partners.
- Particular Partnership: A partnership formed for a specific project or venture.
- Fixed Partnership: A partnership where partners agree to continue the partnership for a fixed period of time.
Advantages
- Easy to Form: Partnership firms are easy to form and require minimal legal formalities.
- Flexibility: Partners can make changes to the partnership agreement as needed.
- Combined Skills and Resources: Partners bring their individual skills and resources to the business, making it more efficient.
- Mutual Support: Partners can provide emotional and financial support to each other.
Disadvantages
- Unlimited Liability: Partners have unlimited liability, which means their personal assets are at risk.
- Risk of Disputes: Partners may have disagreements, which can lead to disputes and affect the business.
- Limited Capital: Partnerships may have limited capital, which can restrict business growth.
Partnership Firm
Definition
- A partnership firm is a business organization formed by two or more individuals to earn profits through a shared business activity.
Characteristics
- Partners voluntarily associate to form a partnership firm.
- A minimum of two persons are required to form a partnership firm.
- The primary objective of a partnership firm is to carry on a business activity.
- Partners share profits and losses in a predetermined ratio.
- Partners have unlimited liability, meaning their personal assets are also at risk in case of business losses.
Types of Partnership
Partnership at Will
- A partnership that can be dissolved at any time by giving notice to the other partners.
Particular Partnership
- A partnership formed for a specific project or venture.
Fixed Partnership
- A partnership where partners agree to continue the partnership for a fixed period of time.
Advantages
- Partnership firms are easy to form and require minimal legal formalities.
- Partners can make changes to the partnership agreement as needed.
- Partners bring their individual skills and resources to the business, making it more efficient.
- Partners can provide emotional and financial support to each other.
Disadvantages
Unlimited Liability
- Partners have unlimited liability, which means their personal assets are at risk in case of business losses.
Risk of Disputes
- Partners may have disagreements, which can lead to disputes and affect the business.
Limited Capital
- Partnerships may have limited capital, which can restrict business growth.
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Description
Learn about the definition, characteristics, and features of a partnership firm, a form of business organization where individuals come together to earn profits.
