PARTNERSHIP

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Partnership :

Partnership is an association of two or more parties, they put Money for business.

Simple Partnership:

Simple partnership is one in which the capitals of the partners are invested for the same time. The profit or losses are divided among the partners in the ratio of their investments.

Compound Partnership:

Compound Partnership is one which the capitals of the partners are invested for different periods. In such cases equivalent capitals are calculated for a unit time by multiplying the capital with the number of units of time. The profits or losses are then divided in the ratio of these equivalent capitals. Tus the ratio of profits is directly proportional to both capital invested as time.

Working partner:

A partner who participates in the working and manages the business is called a Working Partner.

Sleeping Partner:

A partner who only invests capital but does not participate in the working of the business is called a Sleeping Partner.

Division of Profit and Loss:

1. Rule :When Investment of all partners are for the same time, the loss or profit is distributed among partners in the ratio of investment.
Ex. Let P and Q invested Rs. a and b for one year in a business then share of profit and loss be ,

P’s share of profit : Q’s share profit = a : b

2.Rule : When investments are for different time period, then profit ratio is calculated as capital multiplied by length of investment

Ex. P’s share of profit : Q’s share profit = a* t1 : b* t2

Questions with solutions

Level-I

1. A, B and C enter into a partnership. They invest Rs. 40,000, Rs. 80,000 and Rs. 1,20,000 respectively. At the end of the first year, B withdrawns Rs. 40,000, while at the end of the second year, C withdraws Rs. 80,000. In what ratio will the profit be shared at the end of 3 years ?

Solution: A : B : C = (40,000 X 36) : (80,000 X 12 + 40,000 X 24) : (120,000 X 24 + 40,000 X 12)   =     3: 4: 16

2. A, B, C enter into a partnership investing Rs. 35,000, Rs.45,000 and Rs.55,000 respectively. The respective Shares of A, B, C in an annual profit of Rs.40,500 are ?

Solution : A : B : C = 35000 : 45000 : 55000 = 7 : 9 : 11.

A’s share = Rs (40500 x 7/27) = Rs. 10500

B’s share = Rs.(40500× 9/27) = Rs. 13500

C’s share = Rs.(40500×11/27)= Rs. 16500

3. In a business, Lucky invests Rs. 35,000 for 8 months and manju invests Rs 42,000 for 10 months. Out of a profit of Rs. 31,570. Manju’s share is 😕

Solution :      lucky: Manju = (35000 X 8) : (42,000 X 10) = 2:3
Manju’s share = Rs.3/5×31570 = Rs. 18,942

4. Amar started a business investing Rs. 70,000. Ramki joined him after six months with an amount of Rs. 1,05,000 and Sagar joined them with Rs. 1.4 lakhs after another six months. The amount of profit earned should be distributed in what ratio among Aman, Rakhi and Sagar respectively, 3 years after Aman started the business ?

Solution: Amar : Ramki : Sagar =

(70000 X 36) : (105000 X 30) : (140000 X24)   = 12 : 15 : 16.

5 . A begins a business with Rs 450 and is joined afterwards by B with  Rs 300. After how many months does B join if the profits at the end of the year is divided in the ratio 2 : 1?

Solution.-.(B) Suppose B joins for x months.

Then,     450 ´12    =    2
300 ´ x           1

x =450× 6
300

x= 9 months

\B joins after (12 – 9) = 3 months.

6. Shekhar started a business investing Rs. 25,000 in 1999. In 2000, he invested an additional amount of Rs. 10,000 and Rajeev joined him with an amount of Rs. 35,000. In 2001, Shekhar invested another additional amount of Rs. 10,000 and Jatin joined them with an amount of Rs. 35,000. What will be Rajeev’s share in the profit of Rs. 1,50,000 earned at the end of 3 years from the start of the business in 1999?.

 
Solution : Shekhar : Rajeev : Jatin  =

(25000  X  12 + 35000  X  12 + 45000  X  12) : (35000  X 24) :   (35000  X  12)
= 1260000   :  840000  :  420000  =   3  :  2  :  1.
Rajeev’s share   =  Rs.(150000×26)  =   Rs. 50000

7. A,B and C started a business with Rs.15000, Rs.25000 and Rs.35000 respectively.  A was paid 10% of the total profit as a salary and the balance was divided in the ration of investment.  If A’s share is Rs.4,200, then C’s share is: ?

Solution : A, B and C must divide their salaries in the ratio :

15,000 : 25,000:35,000 = 3:5:7
Assume total Profit = 100X.

then A share is 10% of 100X for managing business and 3/15 part of 90X for his investment (as the remaining profit is   (100X – 10X = 90X)
So total A’s share  =  10X  + 315 × 90X =  4,200
⇒X = 150
Substituting X  = 150 in 90X we get remaining profit for sharing. That is Rs.13,500
Now C’s share  = 715×13,500  =  Rs.6,300

Level-II

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A partnership is a business relationship between two or more people who agree to share the profits and losses of a business. Partnerships can be formed for any type of business, but they are most common in small businesses.

There are two main types of partnerships: general partnerships and limited partnerships. In a general partnership, all partners are personally liable for the debts and obligations of the business. In a limited partnership, there are one or more general partners who are personally liable for the debts and obligations of the business, and one or more limited partners who are not personally liable for the debts and obligations of the business.

To form a partnership, the partners must enter into a partnership agreement. The partnership agreement should include the names of the partners, the purpose of the partnership, the contributions of each partner, the division of profits and losses, and the management of the partnership.

Partnership law is the body of law that governs partnerships. Partnership law is based on the common law, which is the body of law that developed over time through court decisions. Partnership law also includes statutes that have been enacted by state legislatures.

A public-private partnership (PPP) is a collaboration between a government agency and a private company to deliver a Public Service. PPPs are often used to finance and build Infrastructure-2/”>INFRASTRUCTURE projects, such as roads, bridges, and schools.

A strategic partnership is a formal alliance between two or more companies that agree to work together to achieve a common goal. Strategic partnerships can be used to share Resources, develop new products or Services, or enter new markets.

A virtual partnership is a business relationship between two or more companies that is conducted primarily online. Virtual partnerships can be used to share resources, collaborate on projects, or sell products or services.

Business partnerships can be a great way to start or grow a business. However, it is important to understand the risks and responsibilities involved in forming a partnership before you decide to do so.

Here are some of the benefits of forming a business partnership:

• Partnerships can provide access to additional capital and resources.
• Partnerships can allow you to share the risks and responsibilities of running a business.
• Partnerships can give you access to the expertise and experience of other people.

However, there are also some risks involved in forming a business partnership:

• Partners are personally liable for the debts and obligations of the business.
• Partners may have different goals and objectives for the business.
• Partners may disagree on how to manage the business.

If you are considering forming a business partnership, it is important to carefully consider the risks and benefits involved. You should also make sure that you have a clear understanding of the partnership agreement and the rights and responsibilities of each partner.

What is a partnership?

A partnership is a business relationship between two or more people who agree to share the profits and losses of a business.

What are the different types of partnerships?

There are two main types of partnerships: general partnerships and limited partnerships. In a general partnership, all partners are personally liable for the debts and obligations of the business. In a limited partnership, there are one or more general partners who are personally liable for the debts and obligations of the business, and one or more limited partners who are not personally liable for the debts and obligations of the business.

What are the benefits of forming a partnership?

There are several benefits to forming a partnership, including:

• Shared risk and reward: Partners share the risks and rewards of the business.
• Access to capital: Partners can pool their resources to finance the business.
• Complementary skills and experience: Partners can bring different skills and experience to the business.
• Flexibility: Partnerships are relatively easy to form and dissolve.

What are the drawbacks of forming a partnership?

There are also some drawbacks to forming a partnership, including:

• Personal liability: Partners are personally liable for the debts and obligations of the business.
• Difficult to manage: Partnerships can be difficult to manage, especially if there are multiple partners.
• Conflicts between partners: Conflicts between partners can be common.
• Dissolution: Partnerships can be difficult to dissolve.

What are the steps involved in forming a partnership?

The steps involved in forming a partnership typically include:

1. Choosing the right partners.
2. Drafting a partnership agreement.
3. Obtaining a business license.
4. Filing the necessary paperwork with the state.
5. Obtaining insurance.
6. Opening a business bank account.
7. Marketing the business.

What are the legal requirements for forming a partnership?

The legal requirements for forming a partnership vary from state to state. However, most states require partnerships to file a partnership agreement with the state. The partnership agreement should include information such as the name of the partnership, the purpose of the partnership, the contributions of each partner, the division of profits and losses, and the management of the partnership.

What are the tax implications of forming a partnership?

Partnerships are pass-through entities, which means that the income and losses of the partnership are passed through to the partners and reported on their individual tax returns. Partners are not required to pay self-EMPLOYMENT taxes on their share of the partnership’s income.

What are the accounting implications of forming a partnership?

Partnerships must keep accurate financial records. These records should include information such as the income and expenses of the partnership, the assets and liabilities of the partnership, and the capital accounts of the partners.

What are the management implications of forming a partnership?

Partnerships are managed by the partners. The management structure of a partnership can be informal or formal. In an informal partnership, the partners may agree to manage the business on a day-to-day basis. In a formal partnership, the partners may elect a board of directors to manage the business.

What are the marketing implications of forming a partnership?

Partnerships must market their businesses to attract customers. The marketing strategy of a partnership will depend on the type of business and the target market.

What are the exit strategies for a partnership?

Partnerships can be dissolved for a variety of reasons, such as the death or withdrawal of a partner, the sale of the business, or the bankruptcy of the business. There are several exit strategies available to partners, including:

• Buy-out: One or more partners can buy out the other partners.
• Sale of the business: The partnership can be sold to a third party.
• Dissolution: The partnership can be dissolved and the assets and liabilities distributed to the partners.

1. A partnership is a business owned by two or more people.
2. Partners are jointly and severally liable for the debts of the partnership.
3. Partnerships are not subject to corporate Income tax.
4. Partnerships are easy to form and dissolve.
5. Partnerships are a good choice for businesses with a small number of owners.

Which of the following is not a characteristic of a partnership?

(A) Partnerships are owned by two or more people.
(B) Partners are jointly and severally liable for the debts of the partnership.
(C) Partnerships are subject to corporate income tax.
(D) Partnerships are easy to form and dissolve.
(E) Partnerships are a good choice for businesses with a small number of owners.

The answer is (C). Partnerships are not subject to corporate income tax. Instead, the income of a partnership is passed through to the individual partners, who report it on their personal tax returns.

1. A general partnership is a partnership in which all partners have unlimited liability for the debts of the partnership.
2. A limited partnership is a partnership in which one or more partners have limited liability for the debts of the partnership.
3. A limited liability partnership (LLP) is a type of limited partnership in which all partners have limited liability for the debts of the partnership.
4. A limited liability company (LLC) is a business entity that offers the limited liability of a corporation and the flexibility of a partnership.

Which of the following is a type of partnership in which all partners have unlimited liability for the debts of the partnership?

(A) General partnership
(B) Limited partnership
(C) Limited liability partnership
(D) Limited liability company

The answer is (A). A general partnership is a partnership in which all partners have unlimited liability for the debts of the partnership.

1. A partnership agreement is a written contract that sets forth the terms of a partnership.
2. The partnership agreement should include the following information:
   (a) The names of the partners
   (b) The purpose of the partnership
   (c) The contributions of each partner
   (d) The division of profits and losses
   (e) The management of the partnership
   (f) The dissolution of the partnership

Which of the following is not information that should be included in a partnership agreement?

(A) The names of the partners
(B) The purpose of the partnership
(C) The contributions of each partner
(D) The division of profits and losses
(E) The management of the partnership

The answer is (E). The management of the partnership is not information that should be included in a partnership agreement. The management of the partnership is typically set forth in the partnership agreement, but it is not required to be included in the agreement.

1. A partnership can be dissolved by the partners, by the death of a partner, or by the bankruptcy of a partner.
2. When a partnership is dissolved, the assets of the partnership are sold and the proceeds are distributed to the partners according to their partnership interests.

Which of the following is not a way that a partnership can be dissolved?

(A) By the partners
(B) By the death of a partner
(C) By the bankruptcy of a partner
(D) By the government

The answer is (D). A partnership cannot be dissolved by the government. The government can only dissolve a partnership if the partnership is engaged in illegal activity.