Characteristic Features of Partnership

A partnership is a contractual obligation between two or more Individuals to maintain and conduct business and share revenue. In a business partnership, all stakeholders start sharing obligations and profits evenly. There are instances of partnerships wherein the partners may well have limited liability. Four types of Partnership can happen between individuals. They include:

• General Partnership
• Limited Partnership
• Limited Liability Partnership
• Limited Liability Limited Partnership

The key characteristics are subject to every variant stipulated in a partnership agreement signed between the parties. The partners are liable to share risk and reward, which means the obligations and revenue are shared. Profit distribution to each partner is entitled to a component of the firm’s operating earnings.

Characteristics of Partnership:

The Characteristics of Partnership include the following:

• Risk and reward sharing – all Partners are liable to share the company’s risks and rewards
• Profit-sharing – Each partner is liable to receive a portion of the firm’s net earnings
• An agreement need not have clauses that all partners are due for equal shares
• The partner’s amount to invest in the business can ascertain the profit-sharing percentage
• Unlimited liability – Partners are liable to share all of the business’s debts and obligations as per the partnership agreement
• This includes any loss or special damages which may arise from either of the fellow partners’ unlawful actions or wrongdoings
• Also, partners are liable for any potential liability and legal risk applicable to third parties
• Decision-making authority – Partners have the power to make decisions that impact the business or its assets as per the characteristics of the Partnership
• Consider sharing of ownership – all individuals start sharing ownership of the company’s assets, even if they have consented that the business will use an asset that originally belonged to one of the partners independently
• Flexibility – the partnership structure can adapt, enabling full control of how the business is handled and funded
• Privacy – the Partnership’s accounting and institutional framework matters are completely private
• The partners’ interests regulate the disclosure of these details as per the characteristics of the Partnership
• Taxation – Since partners are regarded as self-employed, there are no employer’s National Insurance contributions to partners’ profits, and there is no discrepancy between corporate tax and dividend tax credits
• They will be liable for their own tax and National Insurance as a partner
• They must register with Her Majesty’s Revenue and Customs as quickly as possible after launching a new business
• Partners must be up-to-date with information on any tax issues which can cause serious threats and risks to the business
• Membership Changes – There is no need for time-consuming provisions for shares to be converted without paying unavoidable tax implications when there is an alteration in the subscription

Limited Liability Partnership :

LLP is an abbreviation for Limited Liability Partnership. Limited Liability Partnership is an alternate solution to the corporate business form that provides the partners with the advantages of limited liability while incurring reduced regulatory burdens. It also means allowing the partners to organise their inner structure in the same way a conventional partnership would have been. A limited liability partnership is a legal entity subject to liability for the entire amount of its assets. The partners’ liability, on the other hand, is limited. 

Characteristics of Limited Liability Partnership: 

A few characteristics of Llp are as follows.

• LLP is a legal entity – An LLP is a body corporate formed and incorporated under the Limited Liability Partnership Act 2008
• Succession in perpetuity – Unlike a general partnership, a limited liability partnership can continue to survive even if one or more partners retire, become insane, become bankrupt, or die
• It can also sign contracts and own estate in its name
• Legal Entity That Exists Separately – It is a separate legal entity, just like a corporate entity or a company
• Furthermore, it is fully liable for its investments. In addition, the partners’ liability is limited in their ability to contribute to the LLP
• As a result, the LLP’s creditors are not the creditors of the contracting parties

Conclusion:

In the above notes, we understand the Characteristic features of the partnership class 12 topic. We have learned about the meaning of Partnership, the meaning of Limited Liability Partnership, and characteristics of Limited Liability Partnership.

A partnership results from a collaboration among two or more individuals to conduct

business. This agreement can be either oral or written. A partnership is formed in order to run a business. The goal of a partnership is to make money and share it with others. Without a written contract, the partner should split profits and losses equally.