Types of Partners, Merits and Demerits of Partnership Form of Business

  

Date Posted: 4/11/2012 8:53:54 AM

Posted By: sashoo  Membership Level: Silver  Total Points: 382

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TYPES OF PARTNERS.
i) A dormant/sleeping/silent partner:
A dormant partner is one who contributes share capital to the business and shares in the profits registered and losses encountered. However, is not active in day to day activities of the business.

ii) An active partner:
An active partner contributes share capital in the business, shares in the profit registered and contributes in settling debts. He also participates fully in day to day activities of the business. If an active partner is a full-time employee of the business, he warrants getting remuneration.

iii) Quasi partner:
A quasi partner is one who was once a partner of the business but left his share capital to be used in the business. Such a partner acts as a creditor to the business, and he has to be paid interest on his share capital.

iv) Normal partner:
This is one who allows the business to use his name as a partner for a fee. He does not contribute any share capital to the business. He agrees with other partners about the amount he should be paid by letting his name be used.

v) General partner:
This is the one who has unlimited liabilities to the debts of the business or partnership.

vi) Limited partner:
This is a partner that has limited liabilities to the debts of the business or partnership.

vi) Minor partner:
This is a partner who has not attained the age of 18 years. However, he contributes share capital and shares profits and losses equally. After attaining the age of 18 years he is free to register as a major partner.

MERITS OF PARTNERSHIP.
1. Partners make sound decisions because they first discuss them and then vote for the majority.

2. They have enough capital to expand their business. This is because they have security to acquire loans from banks.

3. Losses made in the business are distributed among partners.

4. Specialization is

manifested because different partners may have different skills. This is seen where by talents are pooled from partners for a common goal.

5. Liabilities can be shared. One partner does not suffer the loss alone.

DEMERITS OF PARTNERSHIP.
1. Lack of continuity:
In case of death, bankruptcy or insanity of one partner, the partnership might be dissolved.

2. Profits made are shared among all partners.

3. If disagreement occurs between partners, termination of the business can take effect.

4. Decisions take a long time to be made because the majority have to agree first.

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