Partnership: Definition, Types, and How it Works

In the corporate world, partnerships is a term that is very familiar, even for laymen. Why? because this term is used very often.

But still? Do you already know the meaning of partnership, how it works, its advantages and disadvantages? Don't worry because this time DailySocial.id will provide a complete explanation especially for you.

Partnership definition

A partnership consists of two or more parties running a business and sharing the revenue they receive. Of course, this is different from a joint venture between two or more companies, because a partnership only applies to a group of people.

There are many types of partnerships, but in general they are as we have explained in the first paragraph.

Some of the things that are done in this partnership are doing the same daily tasks, getting the same benefits, and building a business together. However, there are also partnerships that make the other party the "silent partner”, in which one of the parties does not need to interfere in day-to-day affairs.

Types of Partnerships

Quoted from the page The Balanced Small Business, some kind of  partnerships are as follows:

General Partnership (GP)

general partnership is a type of cooperation that is carried out fairly. Each partner in this case will be active in carrying out daily operational activities and have full responsibility for debts and various binding legal issues.

Limited partnership (LP)

Limited partnership are two or more people who carry out day-to-day business operations. But deep partnerships there are one or more parties who do nothing. Well, that's what they are called silent partner.

In terms of sharing profits, all parties in it will receive a share according to their respective portions. However, the responsibilities are different. Those who do not carry out daily operational activities have no responsibility in terms of debt and legal issues.

Limited Liability Partnership (LLP)

Inside type  partnerships In this case, legal protection will be determined and applied to all partners, whether it is a partnership with general or limited status.

Those who run kind partnerships this generally is businesses who work in one field, such as lawyers, accountants, etc. In addition, if it is one of the partners who makes a mistake, then he must be punished, and the other partners will be protected.

How Partnerships Work

Of course, each type of partnership has its own way of working. As previously explained, there is a type of partnership where all parties must share the same responsibilities, rights and obligations.

The first thing to do in a partnership is to choose the type of collaboration you want to do. Apart from that, you can also choose to partner with a new company or join an established company that had a previous partnership.

When you have chosen the type of partnership you want to do, you and the potential partner must make an MoU or memorandum of understanding or contract. Thus, all rights and obligations set forth in writing are legally binding on all parties.

After that, any party that has become a partner can run the business directly. They carry out day-to-day business as described in the contract.

Profit sharing is usually based on a contract signed by both parties. In terms of taxes, each partner pays a different amount.

Even if profits are divided equally in the partnership, each partner still pays their own income tax. Because it is possible that each partner has more than one company.

Advantages and Disadvantages of Business Partnerships

The advantage of a partnership is that the establishment of a business can be done easily, in an informal way if claimed it is necessary to make the partnership business formal and also registered.

In addition, profit sharing can also easily occur based on a joint contractual agreement.

You can also find passive or limited partners. In addition, the opportunity to accumulate active capital is also greater.

However, the downside is unlimited liability and requires the owner to be responsible for all his obligations up to his personal wealth.

Capital accumulation is also less than optimal. Although the partnership form increases capital better than individual shareholders, this company form is still considered less optimal than the individual company form.

You will also find it more difficult to leave the partnership. Because in a partnership, if you want to get out, usually the shares must be sold first to other partners.

As a result, this form of partnership often has to be dissolved, further complicating matters and tarnishing the company's reputation.

Lack of continuity, this can occur if the heirs of the deceased do not want to cooperate with the heir partner. Therefore, conflicts often arise.

So, are you interested in running partnerships business. The most important thing you should pay close attention to when running partnerships business is always alert and careful.

If you only have a role as a partner who gives money, then you don't need to give any time and various actions for the business.

Reference

https://www.thebalancemoney.com/what-is-a-business-partnership-398402