Year 12 Business Studies Legal Structures- Partnerships

Recall Activity On the worksheet in front of you, decide whether the statements are true or false.

Learning Objectives - 1) To be able to define the term Partnership. 2) To analyse the strengths and weaknesses of setting up as a Partnership. 3) To be able to apply your knowledge of partnerships to the case of John and Dave and be able to evaluate why setting up a Deed of Partnership could have helped their situation.

Partnerships This is the simplest way that two or more people can be in business together. In a partnership, partners share the risks, costs and share in the decision making this also means they share the profit the business makes. The partners are jointly and personally responsible for any debts that the business may run up. A partnership does not have a legal existence of its own, so if one of the owners resigns or dies, the partnership is dissolved. Although not a requirement, often partners draws up a Deed of Partnership. This specifies many of the key features of the partnership such as: How much of the finance each has contributed. How much control over decisions each partner has. How the profits will be shared. How the partnership can be ended.

Starter Activity Coronation street worksheet. Watch the clip. While watching the clip consider what benefits and disadvantages Sally and Carla might be facing working as a partnership. Write down your ideas ready for a discussion afterwards.

Partnerships are set up by a Deed of Partnership which is a document made out by the partners and witnessed by a solicitor. This Deed sets out the legal relationship between partners e.g. how profits will be shared out, responsibilities of partners etc. In traditional partnerships the partners have unlimited liability i.e. they were jointly responsible for the debts of their partnership. In 2001 this has been altered so that some large partnerships e.g. accountancy firms can have limited liability. Read more: theory/strategy/legal-forms-of-business.html#ixzz25hxTjrWlhttp://businesscasestudies.co.uk/business- theory/strategy/legal-forms-of-business.html#ixzz25hxTjrWl

Partnership Benefits and Drawbacks Benefits As with sole traders, there are very few procedures to follow in order to set up a partnership. Expertise of more than one person can be brought into the business for decision making and for sharing the work load. Often different partners specialise in different aspects of the business. There are more sources of finance as each person can contribute a share of the start-up funds. Drawbacks Partnerships have Unlimited Liability, complicated by the fact the partners are jointly responsible for the debts of the business. Profits are shared amongst the partners. Partners are legally bound to honour the decisions of the others. The partnership ends on the death or resignation of a partner. A maximum of 20 can join a partnership and this therefore limits the size of the business and the source of funds.

Main Activity Read the case study of John and Dave. (5 minutes) In pairs discuss the answers to each question. Consider and talk through the issues that arise in the case study, linking to your partnership knowledge. (5 minutes) Individually write up your answers and ensure you have carefully justified and evaluated your answer to question 4. (10 minutes)

Extension Activity Go to AS Business UNIT 1/ Unit 1 Financial Planning/ Legal Structures/ Lesson 2 Partnerships winklevoss-twins

Plenary- Mini Quiz

Homework Read the business case studies. Decide what type of legal structure would be the most applicable for each scenario. Due in: Monday 17 th September 2012

Learning Objectives - 1) Defined the term Partnership. 2) Analysed the strengths and weaknesses of setting up as a Partnership. 3) Applied your knowledge of partnerships to the case of John and Dave and be able to evaluate why setting up a Deed of Partnership could have helped their situation.