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partner» who does not take part in the management, but who invests money in
the business.
The partnership has the advantage of pooling managerial talent. One
partner may be qualified in production, another in marketing. The partnership,
like individual ownership, is exempt from most of the reporting that the
government requires of corporations. Furthermore, it has a favourable tax
position when compared with the corporation. Federal taxes are paid by
individual partners on their share of earnings; beyond that the business is not
taxed.
A major disadvantage of the partnership is that each member is liable for
all
the debts of the partnership; the act of any partner is legally binding upon all
the others. If one partner takes a large amount of money from the business and
squanders it, the others must pay the debt. Partnerships suffer another major
disadvantage: decision-making is shared. If partners have serious disagreements,
the business is bound to suffer.
Nevertheless, the partnership remains a vital part of the overall business
economy.
Vocabulary
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