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What is a Partnership Organization

By: Haseeb Jamal / On: Jun 10, 2017 / Definition, Advantages
Partnership Organization


Partnership Organization is defined as an association of two or more persons to carry on as co-owners of a business for profit. The success of partnership depends upon mutual confidence understanding, co-operation & adjustment of the members to accommodate & appreciate each other’s view. Each of the artiness should realize that it is his business & he should work hard to earn greater & greater profit. Every partner is liable & responsible for the acts of other partners in that business. To avoid any Complication at a later stage the constitution of company may be written in an agreement form.

Advantages of Partnership Organizations:

  • Due to large number of owner the amount of capital that can be collected is more than that in the case of sole trade organization.

  • In this type of organization persons possessing different abilities & skills are chosen & brought together. Therefore the managerial ability of the firm as a whole would be much greater than in case of a sole trader.


  1. Due to unlimited liability risk involved is more.

  2. After the death or retirement of any one partner the partnership organization may come to an end.

  3. Sometimes due to some misunderstanding friction may arise the partners which effect adversely in the efficiency & expansion of business.

  4. All the pertness are jointly and severally liable for the acts of the partner. Thus some times mistakes of one partner may cause a big loss to all the partners

Types of Business Partners:

Members of this type of organization may be associated in different ways. These members can be classified in the following ways.

General partners:

All the partners who participate actively n the business, sharing all the responsibilities, including unlimited liability.

Active partners:

These are these partners who take active part in the management & help in the formulation of policies. These are also known as working or managing partners.

Silent partners:

partners, who just invest money & do not take any part in the management even though he may be known to the public as a partner.

Nominal partners:

Partners who do not invert money & do not take part in the management, but they lend their reputed name for the company’s reputation are known as nominal partners.

Secret partners:

These partners take part in the management secretly but no where their names appear.

Minor partners:

A person who has attained the age of 18 years & associated with the business is known as minor partner. Such partner can be allowed only with the consent of other members. His liability is limited to the investment only.


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