Question

What is liability and partnership?What are advantages of partnership and also it's disadvantages?
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Answer 1

A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence.

Advantages of a Partnership

The key advantages of a partnership are as follows:

• Source of capital. With many partners, a business has a much richer source of capital than would be the case for a sole proprietorship.
• Specialization. If there is more than one general partner, it is possible for multiple people with diverse skill sets to run a business, which can enhance its overall performance. In general, this may mean that there is more expertise within the business.
• Minimal tax filings. The Form 1065 that a partnership must file is not a complicated tax filing.
• No double taxation. There is no double taxation, as can be the case in a corporation. Instead, profits flow straight to the owners.

Disadvantages of a Partnership

The disadvantages of a partnership are as follows:

• Unlimited liability. The general partners have unlimited personal liability for the obligations of the partnership, as was the case with a sole proprietorship. This is a joint and several liability, which means that creditors can pursue a single general partner for the obligations of the entire business.
• Self-employment taxes. A partner’s share of the ordinary income reported on a Schedule K-1 is subject to the self-employment tax. This is a 15.3% tax (social security and Medicare) on all profits generated by the business that are not exempt from these taxes.

Answer 2

$\bold{Partnership} :$ can be defined as relation between two or more than two people who agree to invest capital, share the profit and loss carrying out all the managerial activities together with main aim of earning profit.

Merits:

1). Partnership firm is very easy to form as no legal formalities are required to be done for formation of business.

2). In partnership firm all the partners together contribute sum of money for the capital of the business. There is is huge financial resources available.

3). All the partner share the risk in the same ratio as the share profit.

4). According to the skill and knowledge level of different partners, the work is divided between each partner.

5). Partnership firm can make changes in net self without prior permission of government.

Demerits

1). The liability of all the partners is in limited. In case of loss partners can lose their property to settle their accounts.

2). As partners belong from different backgrounds and different families therefore there are great opportunities of conflicts among the partners.

3). The existence of partnership does not get affected by death or insolvency or incapacity of any partner.

4). The shares cannot be transferred from one person to another.

5). Public has very less partnership firms because the accounts and annual reports are not published.