What is partinership? what are the reasons for forming partinership?


partnership is a "relation which subsists between persons carrying on business in common with a view to profit". Partnerships are formed for the following three main reasons:

1.Raising additional capital
As a business expands one owner may not be able to finance all of its operations adequately. In order to raise additional capital one or more partners may be sought.

2. Developing and attracting expertise
Expansion of business operations requires expert knowledge in key areas of the business. It is not always possible for one person to be able to handle satisfactorily different areas of a business. It then becomes necessary to attract expert knowledge so as to improve overall performance. One effective way of attracting and committing experts to a business is by offering co-ownership. Partnerships for this reason are the most common form of business organization with professionals.

3. Sharing of administrative responsibilities and losses
The burden of administrative responsibilities and losses can be eased when shared among partners rather than being borne by a single owner.

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