Chapter 13, Problem 1UTI

To determine

Concept Introduction:

People start their own business and select the form of organisation depend upon their need and kind of their business. Over the other form of organisation, partnership have some different advantages.

To Explain:

The major characteristics of a partnership firm that might influence the people decision.

Answer to Problem 1UTI

People choose the partnership form of organization as it has distinct advantages.

Explanation of Solution

The characteristics of partnership form of organization are as follows:

• The process for formation of partnership firm is simple and convenient.
• Partnership is an association between the persons who has a good faith with each other and has a good knowledge of conducting business and have a common objective of achieving a financial goal.
• All the partners of the partnership firm are the joint owner of the business property.
• One partner act will bind the other partners and partnership firm also, even in any wrongful act.
• The partners are jointly and severally liable for the partnership firm if partnership deed is made of general liability. And if partnership deed is made of limited liability than each partners liability is limited to the extend of his investment only.
• Currently, Limited Liability Partnership (LLP) form of partnership has developed, in this partners liability is limited yet they can participate in the management. In LLP, any obligation created by one partner cannot be recovered from the other partners.