ACTIVITY 1

PARTNERSHIP & CORPORATION

1. What is a Partnership?

-A partnership is a formal arrangement by two or more parties to manage and operate a business and
share its profits. There are several types of partnership arrangements. In particular, in a partnership
business, all partners share liabilities and profits equally, while in others, partners may have limited
liability. There also is the so-called "silent partner" in which one party is not involved in the day-to-day
operations of the business.

2. Define the term “Mutual Agency” (Explain it using your own words)

-For me, mutual agency is a type of partnership wherein one partner can bind all partners in an
agreement to partnership debts. This is also called unlimited liability. Mutual agency is an important one
because this allows one partner to enter into contract that bind the entire partnership. It has a big
advantage because each partner has authorization powers and the ability to enter the partnership into
business contracts.

3. What is meant by the term “Unlimited Liability”?

-Unlimited liability refers to the full legal responsibility that business owners and partners assume for
all business debts. This liability is not capped, and obligations can be paid through the seizure and sale
of owners’ personal assets, which is different than the popular limited liability business structure.

4. What is the difference between a General Partner and a Limited Partner?

-The difference between a general partnership and a limited partnership, a general partnership
means the same for everyone meaning they share the business profits, debts, running business. Limited
partnership is like an investor. Invests money in the business but down not have any management
responsibilities.

5. What is Articles of Partnership? Why is it considered important?

-Articles of partnership is a contract that forms an agreement among business partners to pool labor
and capital and share in profit, loss, and liability. Such a document acts as a rule book for limited
partnerships by outlining all the conditions under which parties enter into a partnership. Parties agree
to articles of partnership voluntarily. An articles of partnership agreement is not legally required by any
regulatory body but is considered a best practice. It is important because it can be useful in preventing
and resolving disagreements among partners since it clarifies the terms of the relationship and outlines
how a partnership's assets are shared.
 6. What is the minimum number of partners in a partnership form of business?

-There must be at least two members to form a partnership, so minimum number of partners in a
partnership firm is two (2). The maximum number of partners in a partnership firm can be fifty (50) as
per the provisions of the Companies Act, 2013 and all such persons must be competent to contract.