DAVAO CENTRAL COLLEGE,
INC.
Juan dela Cruz Street, Toril, Davao City
Accredited by ACSCU-ACI
Landline No. (082) 291 1882
TLE M9
ENTREPRENEURSHIP
(WEEK 11)
LEARNING MODULE
SY 2020-2021
Prepared by:
Michelle Ann M. Espinosa, LPT
TLE M9 – Entrepreneurship | Page 1
Instructor: Michelle Ann M. Espinosa,LPT
DAVAO CENTRAL COLLEGE,
INC.
Juan dela Cruz Street, Toril, Davao City
Accredited by ACSCU-ACI
Landline No. (082) 291 1882
Week 11
Unit 4: Forms of Small Business Ownership
Topic: Partnership
Learning Outcomes:
1. Explain the difference between general partnership and limited
partnership
2. Give examples of businesses under sole proprietorship.
Concept Digest
Partnerships
A partnership is a legal association of two or more persons as co-owners
of an unincorporated business. A partnership is formed with the purpose
of eliminating some of the disadvantages of sole proprietorships while
retaining some of their advantages.
Types of Partnerships
Partnerships may be classified according to the liability of the
partners. They are as follows:
1. General partnerships
A general partnership is an association of two or more persons,
each with unlimited liability and who are actively involved with
the business.
2. Limited Partnerships
A limited Partnership is an arrangement in which the liability of
one or more partners is limited to the amount of assets they
invested in the business.
Partnership Agreement
The possibility of disagreement between partners is always present in a
partnership. There are certain operational concerns that could be the
subject of disagreement. Disagreements oftentimes negatively affects
employee morale and work attitude. It is important for the firm to be
spared of such difficulties.
The partnership agreement is a document designed to prevent or at least
minimize disagreements between partners. It usually covers the
following:
1. Purpose of the business
2. Term of partnership
3. Goals of the partners and the partnership
4. Financial contribution made by each partner at the beginning and
during the lifetime of the business
5. Distribution of profits and losses
6. Withdrawal of contributed assets or capital by a partner.
7. Management powers and work responsibilities of each partner
8. Provisions for admitting new partners
9. Provisions for expelling a partner
10. Provisions for continuing a business
11. Provision for determining the value of a departing partner’s
interest and method of payment of that interest
12. Methods of settling disputes through mediation or
arbitration
13. Duration of the agreement and the terms of dissolution
Advantages of Partnerships
Partnerships have advantages pertaining to the following:
1. Ease of formation
Like sole proprietorship, partnerships are easy to form. The only
requirement before it starts to operate is for the partners to
agree on basic aspects of the business like the nature of the
business, location, capitalization and the like.
TLE M9 – Entrepreneurship
Instructor: Michelle Ann M. Espinosa,LPT
DAVAO CENTRAL COLLEGE,
INC.
Juan dela Cruz Street, Toril, Davao City
Accredited by ACSCU-ACI
Landline No. (082) 291 1882
A written agreement called partnership agreement is drawn to
formalize what has been agreed upon.
2. Pooling of knowledge and skills
The combined knowledge and skills of the partners provide
partnership with distinct advantage.
3. More sources of capital
The combined resources of the partners provide bigger source of
funding and high credit rating.
4. Ability to attract and retain employees
Attracting and retaining good employees is a difficulty inherent
to sole proprietorship. Partnerships are able to overcome this by
offering partner status to valuable employees. This advantage
minimizes the potential harm that may be done when a key employee
moves over to another firm.
5. Tax advantage
The income of the partnership is not taxed separately from the
partner’s income. Any profits derived by the partners are taxed as
their individual incomes.
Disadvantages of Partnerships
Operating partnerships are hindered by the following:
1. Unlimited liability
Partnerships, like sole proprietorship, are saddled with
disadvantage of unlimited liability. Although one or more partners
may opt to have limited liability, the remaining partner carries
the burden of unlimited liability.
2. Limited life
When a partner dies or withdraws from the business, the
partnership is terminated. In essence, the life of partnership is
more limited than that of a sole proprietorship.
3. Potential conflict between partners
There are occasions when partners disagree on certain ways of
operating the business, and there are many potential areas of
disagreement. Among these are the following:
a. Adding new products or services carried by the business
b. Hiring new employees
c. Decisions on credit extensions
d. The grant of additional benefits to employees
When conflict between partners persists, operations are affected.
The condition may even lead to bankruptcy.
4. Difficulty of dissolving the business
In partnership’s dissolution of business, it may not be easy to divide
whatever assets are left for distribution to the partners as some of the
assets may be fixed or movable.
References:
Entrepreneurship and Small Business Management, Medina, Roberto G., 2015
TLE M9 – Entrepreneurship
Instructor: Michelle Ann M. Espinosa,LPT
