THE NEED FOR PARTNERSHIP

So far, we have considered mainly business owned

by only one person. Businesses that set up to make
a profit can often have more than one owner and
there are various reasons for multiple ownership.
There are two types of multiple ownership :
partnerships and limited companies.
 ADVANTAGES OF PARTNERSHIP
More capital can be raised, i.e. with additional partners.
Additional partners bring in a variety of skills and expertise that
benefit the partnership.
The experience or ability required to manage the business cannot
always be provided by one person working alone.
The responsibility of management could be shared by additional
partners.
A partnership of family members can bring a stronger desire to succeed within
dependable environment.
Partnership are ideal organisations for professional practices such as medicine, law and
accounting.
Profits from partnership are taxed as the personal income of the partnership.
 DISADVANTAGES OF PARTNERSHIP
The partners have unlimited liability.

A partnership is dissolved on the death of the other partners.

It is difficult to liquidate or transfer partnerships.

A partnership may have difficulty in raising sufficient capital for large-scale

operations. Increased unlimited liability could also be a deterrent to expanding
the business.

They may be disagreements between the partners.

NATURE OF PARTNERSHIP
A partnership has the following characteristic:
It is formed to make profits.

It must obey the law as given in the

Partnership Act 1890. If there is a limited
partner, as described in section 36.3, the
Limited Partnership Act of 1907 must also be
complied with.
 Normally, there can be a minimum of two and a maximum of 20
partners. Exceptions are banks, where there cannot be more than
ten partners; also, there is no maximum limit for partnerships of
accountants, solicitors, stock exchange members or other
professional bodies receiving the approval of the relevant
government body for this purpose.
Each partner (except for limited partners, described below) must
pay his or her share of any debts that the partnership is unable to
pay; they are personally liable. If necessary, partners could be
forced to sell their private possessions to pay their share of any
debts. This can be said to be unlimited liability.
 PARTNERSHIP AGREEMENT
Partnership deeds or agreements in writing are not necessary
for partnerships, however, it is advisable to have a written
partnership deed or agreement drawn up by a solicitor or
accountant to prevent problems between partners occurring.
The written agreement can contain as much, or as little, as the
partners want since there are no requirements in law as to what
it must contain.
The usual accounting content are as follows:
1. The capital to be contributed by each partner.
2. The ration in which profits (or losses) are to be shared.
3. The rate of interest, if any, to be paid on capital before the
profits are shared.
4. The rate of interest, if any, to be charged on partners
drawings.
5. Salaries to be paid to partners.
6. Performance-related payments to partners.
7. Arrangement for the admission of a new partner.
8. Procedures to be carried out when a partner retires or dies.
 CONTENT OF PARTNERSHIP AGREEMENT
1. Capital contributions
Partners need not contribute equal amounts of capital. What matters is
how much capital each partner agrees to contribute.

2. Profit (or loss) sharing ratios

Although partners can in fact agree to share profits/losses in any ratio
that they desire, it is often thought by students that profits should be
share in the same ratio as that in which capital is contributed. For
example, suppose the capital were Allen $20000 and Beet $10000;
many people would share the profits in the ratio of two-thirds to one-
third, even though the work to be done by each partner is similar.
3. Interest on capital
If the work to be done by each partner is of equal value but the captal
contributed is unequal, it is reasonable to grant interest on the partners
capital. This interest is treated as a deduction prior to the calculation of
profits and its distribution according to the profit-sharing ratio. The rate
of interest is a matter of agreement between the partners, but it should
equal the return that they would have received if they had invested the
capital elsewhere.

4. Interest on drawings
It is clearly in the best interests of the business that cash is withdrawn
from the business by the partners in accordance with the two basic
principles of: (a) as little as possible, and (b) as late as possible. The
more cash that is left in the business, the more expansion can be
financed, the greater the economies of having ample cash to take
advantage of bargains and of not missing cash discounts. To deter the
partners from taking out cash unnecessarily, the concept can be used of
charging the partners interest on each withdrawal, calculate from the date
of withdrawal to the end of the financial year. The amount charged to
them helps to swell the profits divisible between the partners. The rate of
interest should be sufficient to achieve this without being too harsh.

5. Salaries to partners
One partner may have more responsibility or tasks then others. As a
reward for this and rather than change the profit and loss sharing ratio,
that partner may have a partnership salary, which is deducted before
sharing the balance of profits.
6. Performance-related payments to partners
Partners may agree that commission or performance-related bonuses
should be payable to some or all the partners in a way that is linked to
their individual performance. As with salaries, these would be deducted
before sharing the balance of profits.
 NATURE OF OUR COMPANY
Our companys name is Matthew & Maria Company.
Our company located at 99A, Jalan Lembah Bujang,
Taman Lembah Bujang, 08100 Bedong, Kedah,
Malaysia. Our company run the business of selling
digital product.
 BACKGROUND OF OUR COMPANY
Our company is Matthew & Maria Company and running a
business of sell digital product. Types of digital product that
our company sales are for suitable for adults and teenagers.
Our company sales laptop, smartphone, camera, smartphone
casing, laptop hardware and so on. All product that sell by our
company are high quality product.
Our company also provides free delivery
services for VIP members or the customer
who buys more than RM1000.
 PARTNERSHIP
AGREEMENT OF OUR
COMPANY
 Matthew Maria

1) Capital to be contributed by each partner 42000 22000

2) Ratio in which profits are to be shared 1:1

3) Interest on capital 4% 4%

4) Interest on drawings 5% 5%

5) Salaries to partner 2400 2400

Signature of partners:

Matthew Maria

( Matthew Chan) (Maria Carey )

 CONCLUSION
As conclusion, we can see that the
performance of our company in year 2016 is
better than year 2015. This means that we had
done our business well. We will try to
improve more so that our company will be
more excellent.