3.2 The Partnership Agreement In order to regulate matters between the partners and prevent dissolution, a partnership Agreement is strongly advised. A Partnership Agreement can define some broad areas of responsibility and authority such as Details of the partners, and the name of the business they carry on Duration of the partnership date of commencement and any anticipated termination date Capital contributed by the partners, and any agreement on interest payable to partners for money introduced Calculation and division of profits this need to be specified particularly where partners contribute unequally; Management and control of the business this is most needed where partners put in unequal amounts of time in the partnership. Where there is a sleeping partner, management partners may need to guard against future interference, and provide for their own salaries before profits are divided and Dissolution what happens on retirement, death or withdrawal of a partner has to be spelt out to prevent automatic dissolution of the partnership. Advantages a) Partnership is one way fora proprietorship to grow. Two or more partners can pool their skills and other resources to create a firm that is large and stronger than either could support alone. b) Have tax advantages over corporations. Disadvantages a) Partners unlimited liability. A partner is worse off than a proprietor. She/he bears the liabilities of the entire firm. If the firm fails, a partner can lose far more than was put into it. b) The death of any partner ends the firm’s legal life. c) A partner’s withdrawal can also create problems, someone either anew partner or the existing ones must be willing to buy his or her interests in the firm. Until a buyer is found, the partner’s investment maybe frozen i.e. unable to be withdrawn as cash or invested in another business. 4.0 Cooperatives A Cooperative is an enterprise owned and controlled by all the people working for it, for their mutual benefit. They are usually limited companies cooperative societies or more rarely partnerships.
