Partnerships 7.2 Partnership—A business that is owned and controlled by two or more people. Ex. Small retail stores, construction companies, doctors, lawyers, accountants, etc. Two types of partnerships: 1. General—Partners enjoy equal decision making authority.They also have unlimited liability. 2. Limited—Partners who provide capital($) but do not play an active role in running the company. Liability is also limited.
Advantages of Partnerships 7.2 Advantages of Partnerships: 1. Ease of start-up 2. Specialization 3. Shared decision making 4. Shared business losses
Advantages of Partnerships Easy start up– Few government regulations Costs tend to be low Partners usually develop a partnership contract 2. Specialization—Specific business duties can be assigned to different partners based on expertise and individual talents. Ex. One good in sales—other good in accounting
Advantages of Partnerships Shared Decision Making—Partners can minimize mistakes by consulting with each other. Can pool each others skills 4. Shared Business Losses—The sharing of losses may enable a partnership to survive a situation that might cause a sole proprietorship to fail. Example: 2 partners: Business loss $20,000: Each partner loses only $10,000 each. Sole Prop.=$20,000
Disadvantages of Partnerships Unlimited Liability—Each partner is responsible for debts incurred by the business. If one partner refuses to pay for his share, then the other partners are still liable for the debt. 2. Potential Conflict—Disagreements or conflicts may arise among partners. Different management styles Personality conflicts
Disadvantages of Partnerships Lack of Longevity—Life of the business is dependent on the willingness and ability of the partners to continue to work together. One may decide that he/she can no longer work together as partners. Find a new partner or maybe even close the business.
Partnerships Research Research Ben and Jerry’s Ice Cream Company. Did the business start as a partnership? What things did the two have in common? Did each of them bring strengths to the partnership that the other did not possess? How do they choose their flavors? Describe in a ½ page; single spaced. We will discuss: Turn in for credit
Partnerships Exercise Partnerships Thursday, February 26, 2007 Economics Research and answer the following questions in writing: Print and put in period folder. Discuss the difference between general partnerships and limited partnerships. What happens if one partner wants to leave the partnership? What are the options? Discuss. Is a written partnership agreement required? Is it wise to have one? Why? Are owners personally liable for business debts? Explain.
Partnerships--Exercise Pick up “Partnerships” Handout –(Limited/General) “Google It” Answer in Detail for credit Print—Put in your period folder