TYPES OF PARTNERS IN A PARTNERSHIP BUSINESS

What Are The TYPES OF PARTNERS IN A PARTNERSHIP BUSINESS

In this article, we will explain your different types of partners

in a partnership business.

A partnership is a type of business which may consist of two or more owners.

These owners share profits. 

Based on the type of partnership these partners may or may not take part 

in the management of the partnership.

There maybe several types of partners in a partnership business. Some of 

them are explained below.

 

Memorize the types of Partnership 

Types of partners are mentioned below

1. Working partner/Active partner

A working partner is one who actively takes part in the management of a partnership business. 

He/she contributes his or her share of capital while joining the business as a partner.

Working partners have unlimited liability. And share profit and losses.

2. Sleeping/ dormant partner

Sleeping partners are a bit lazy so does not take an active part in the management of a business. 

They contribute their share of capital while joining the business.

They are bound by the activities of the working partners. And shares profit and loss of the business. 

They have unlimited liabilities just like the working partners.

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3. Secret partner

Though it takes part actively in the running of the business. Secret partner’s involvement with the business is not known to the public.

It might be because of the secret partner has a bad reputation, for example, say, for the failure, in a previous business or has some legal issues.

The secret partner has unlimited liability. Shares capital and profit and loss of the business.

4. Nominal partner

A nominal partner is a person who does have neither ownership nor any say in the running of the business?

Often an individual with good networks and well known, whose association increase the credibility of the firm.

He/she does not contribute capital neither has any share in the profit or loss of the business.  

He just gets a fee for allowing his name to be used In the business.

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5. Limited partner

Part owner of a company whose liability to the debt of the firm is limited to the amount they have invested in the business. Limited partners are also known as silent partners.

They might have restricted voting power in selective issues or based on the partnership agreement. And do not participate in the daily running of the business.

6. Partners in profit

A partnership business might include some additional partners only because of their money and goodwill. This kind of partner shares profit only.

Though they contribute capital but they are not part of the management team.

They are liable to third parties for the actions of other partners.

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7.Partner by Estoppel 

This type of partners though not entered in a formal partnership agreement, regarded as a legally binding partner only because they represented by their conducts and words, as though,

they represent the partnership, or allow others to represent themselves as such.Thus, they are liable for any liability (loan) obtained by that firm on the basis of such representation.

8. Sub- partner

A sub partner is a partner who shares the profit earned by a partner in a firm. he/she in no way connected with the firm as a partner thus has no say in the daily management of the business. He/she is not liable for the debt of the firm.

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5 steps to Risk Management Process (with example)

What are the 5 steps to the Risk management process?

In this article, we will discuss 5 steps of  Risk management process with examples.

Your success as a project manager or team member will depend on your ability to manage risks as efficiently as possible.

By applying a systematic risk management process, you will be able to identify the potential risk that your company may face in the future and make a pre-planned response, should the risk occur in reality.

Device a risk management plan! its must!

by identifying the possible risk  a company can prepare itself financially to irradiate or control the risk effectively.

Risk management prevents or controls the wastage of resources by identifying and prioritizing potential risks resulting in a predetermined response in advance thus reducing the financial loss of a company.

And focus on the more important task of achieving a healthy net profit amount for the year.

So, every manager must learn 5 core steps of risk management to run his/her business more smoothly.

Learn the basic risk management technique

A risk might be defined as an uncertain event that might have a negative impact on the company whether in terms of goal achievement or monetary goal of earning profit.

Now then, you have learned about a brief definition of risk. Let us discuss risk management.

Risk management is a process of developing a predetermined response to potential hazards that might be faced by your business threatening it with a financial or non-financial loss as consequences.

Sources of this risk might include competition, micro economic factors, development of new technology, legal hazards, management error and natural disasters.

Development of these predetermined response starts with the identification, assessment, and prioritization of risk by you and your team members.

Then after the identification and assessment of potential risk is completed, financial and other resources are used with proper coordination to minimize, monitor and control the probability of occurring the identified risk in reality.

The possible response to the identified risk may also be aimed at controlling the impact of the risk, should it occur in reality.

Development of possible response to the risk might involve the assessment of several legal, economic, behavioral factors.

Although there may be differences in the jargon used all risk management processes use these same basic steps discussed below.

5 basic steps in risk management process

1.   Identify the risk: You and your team will uncover the potential risk with their detailed description provided it will have an impact on your company's objective.

At this stage, you will open up a risk register, make a list of the risks for further analysis.

2.   Analysis of the risk: in this second stage you will determine the probability of occurring the risks in reality and what might be their consequences on the company. Become well understood with the nature of the risk and its likely impact on project goals and objectives.

Decide whether they are really a threat or opportunity for the company. Register the gathered data in your risk register for further analysis.

Further evaluation and ranking of the risk: at this stage, you will rank the identified risk based on their likelihood of occurrence, the severity of impact and consequences. Add the ranking in the risk register.

4.   Design response to the risk: at this stage you will set out a plan to neutralize the highest rank risk or at least to minimize its bad impact on company objectives. 

   Or if it is an opportunity, develop a strategy to get the best out of it. Come up with a risk mitigation plan, preventive measures and contingency strategy at this stage.

Monitor control and review stage: during the progression of the project, constantly monitor, if there is any sign of the identified risk being occurred in reality. 

If any such sign is sighted, implement your response plan, as designed in the risk management process.

Risk management ensures the smooth running of the business by reducing unhealthy surprises and discovering golden opportunities for the business. Problems can be tackled more efficiently as they were anticipated earlier and adequate measures were planned.

Human resources can be trained in advance to tackle the possible risks and resources can be allocated accordingly.

3 Examples of risk management process

1. Risk of customer credit: a cement wholesaler carries out the credit worthiness of its existing customers and finds that 5 of its existing customers has failed to make payment within deadline several times in six months period.

So, He identifies it as a risk and decides not to extend the invoice credit term period to these customers anymore. And do business with them only on a cash basis.

2.   Risk on capital investment: an investor finds that a tiles manufacturing firm in which he has made quite a good amount of investment has a good amount of liability in the form of debt.

He finds it as a risk thus decides to sell its share until the situation gets better.

3.   Risk of a bad reputation: a local community school used to enroll students without enrollment test. As it was relatively new.

But since it is now established, it has decided to enroll students only on the basis of enrollment test results, which it has introduced recently.

The managing community of the school believes that the enrollment test system will increase the credibility of the school amongst the parents of the potential new students.

 And will also reduce the risk of earning a bad reputation of enrolling students only for money without ensuring the enrollment of quality students.

Please let us know if you have enjoyed this article in the comment box below. Thanks for reading the article until the end.

Written by: Dony.

Blogger and Academic writer

Concept of Business .11 Features of business(Top most important)

Concept of business/Meaning /Definition/Features of business

Human needs and wants are unlimited. but the human race doesn’t have the necessary skills and resources to fulfill those needs and wants all by themselves. 

Which makes the business activity a must to survive in the modern world.

In this section of the article, we will get to know the modern concept/meaning of business.

Business tend to fulfill all the needs and wants of people either by manufacturing products, services by themselves or by reselling products or services bought from other producers.

Figure 1 let us reveal the concept of business

The word “Business” derived from the word “Busy”, which means “to being busy in something”.  But in the context of business activity, this meaning is incomplete contrary to the scope of business activity.

Anyone can get engage in playing, singing, social gathering but this cannot be regarded as “business” (economic activity). Even an economic activity aimed at earning a profit can not be regarded as a “business” if it is not legal in the eyes of the law. 

For example, selling drugs, smuggling even if it is done with the aim of making a profit.

So, at last, we can say that whenever people engage in the production, distribution or any other related economic activity to fulfill the needs and wants of the with the aim of making a profit than he or she is said to have engaged in business activity.

Activities mentioned below regarded as a business activity whenever conducted with the aim of earning a profit.

ü  production of goods and services.

ü  Reselling and distribution of goods to final consumers.

ü  Related services such as banking, warehousing, insurance, transportation and marketing.

Definition  of business

In general sense business is buying goods and services at cheaper price and reselling them to final consumers with a profit margin.

But in reality, a business doesn’t restrict the buying and selling of goods or services only.  The scope of business is much broader.

Any legal economic activity necessary to produce goods for commercial purpose and distributing them to final consumers comes within the scope of business.

So, the extraction of raw materials, conversion of raw materials to final products and activities related to distribution of these final products to final consumers all falls under business.

Figure 2 Definition of business

Some prominent definition of business is written below:

According to Stephenson business “Is the regular production or purchase and sale of goods undertaken with an objective of earning profit and acquiring wealth through the satisfaction of human wants."

According to brown and Petrello “Business is an institution which produces goods and services demanded by people”. It means business is an institution that produces goods and services needed by society. If the demand is increased, the producer also will increase production

According to Dicksee “Business refers to a form of activity conducted with an objective of earning profits for the benefit of those on whose behalf the activity is conducted." 

According to Lewis Henry business   " is a Human activity directed towards producing or acquiring wealth through buying and selling of goods."

 

Essential Features/characteristics of business

Figure 3 We are writing the Features of business

As an important part of social science, business tends to engage in the production and distribution of goods to fulfill human needs and wants with the scarce resources left at our disposals. There is some essential distinctive feature/nature of the business which made this profession different from other jobs. Some of the features of the business are discussed below.

1. Profit expectancy: the main feature of a business is that it is conducted to earn a profit as a reward for taking the risk of investing capital and resources to produce goods and services for reselling. 

  Anyone who produces or buys goods for own consumption will not be regarded as engaged in business activity.

2. Risk of uncertainty: is an integral part of the business. Businesses take risks to earn a profit so “profit” is regarded as the” reward of taking the risk “.. there can be a fall in price of products in the market. 

   Loss can also be incurred by natural disasters like tsunami or earthquake etc. businesses tend to survive in the market accepting all these risk factors as these risk and uncertainty are an integral feature of the business.

3. Recurring transactions: to be regarded as a business the owner must conduct several deals within a period, not just one and two. 

   Anyone who buys, say a refrigerator for own use but then sell it off due to non-convenience later, will not be regarded as conducted a business transaction.

Figure 4 Master Business skills to succeed

4. Legal validity: to be regarded as a business, the organization must produce or sell goods and services that are legal and provides benefits to society. Any establishment which sells illegal products such as drugs for profit will not be regarded as a business at all.

5. Exchange of goods and services: All businesses involve the exchange of goods and services with monetary value.

6. Business skills: to survive and develop in the market, the owner of the business must have the necessary skills and preferably experience to run a business. A potential entrepreneur must conduct research on necessary business skills before jumping into the business.

Figure 5 I am learning Business skills

7. Buyers and sellers: to be regarded as a valid business transaction there must be at least two parties who are willing to exchange the ownership of goods or service in return for a determined money value.

8. Flexibility: a business must be flexible enough to react quickly to its internal and external environment. For example, consumer taste changes constantly, if a business fails to update its product range accordingly, it will go out of the business soon.

9. Freedom:  a business person is not obliged to anyone.  This is one of the most important features of business Which persuades many people to indulge in business.

10. Customer satisfaction: this day’s modern businesses aims to earn profit by providing ultimate satisfaction to consumers. They tend to satisfy consumers by providing quality products at reasonable prices. 
  
  They run their business just not only to earn profit but also to develop new customers and maintain existing ones by excellent service quality, updated technology and new innovation.

11. Social obligation: modern businesses tend to reflect a positive impact on society by its corporate social responsibility activities. They tend to be service-oriented rather than profit-oriented.

Written by: Dony.

Blogger and Academic writer