Where two or more persons agree to conduct a business together and to share in the profits or losses, we have the partnership. The partnership is like the single enterpriser and unlike the corporation form of management, which will be discussed later, in that the partners are personally responsible for the losses. Again, the partnership is not a distinct legal personality as is the corporation. When a claim against the partnership is to be collected in the courts, it is the partners who are sued and not the partnership as such. Moreover, where there is no definite agreement to the contrary, any one of the partners may make an agreement for the partnership which will be binding on all of the partners. Any partner may find himself compelled to sacrifice all of his property to satisfy the debts of the partnership contracted by some other partner. In the partnership the enterpriser function is shared by the partners.

85. Advantages And Disadvantages Of The Partnership

The partnership possesses some of the advantages of the single enterpriser scheme. The partnership is easily formed and there is a close connection between the direction of the enterprise and the securing of profits or the suffering of losses. Those who make the decisions stand to lose or gain from them. This connection, however, is not so close as in the case of the single enterpriser, since it may happen that one partner has to suffer for the bad judgment or mismanagement of another. The partnership has an advantage over the single enterpriser plan in that it is possible in this form to bring together the various kinds of abilities essential to the successful conduct of the enterprise. For example, in conducting a small manufacturing establishment two entirely different forms of business management may be found desirable. The kind of ability necessary to the successful conduct of the manufacturing end of the business is entirely distinct from the kind of ability which is essential to the successful marketing of the product. Both kinds of ability can more readily be combined in the partnership where one partner manages the factory and another manages the sales, than in the single enterpriser form where the same man must perform both functions. Another advantage of the partnership form over the single enterpriser form lies in the fact that the former may secure greater capital by pledging its greater credit due to the unlimited liability of all of the partners, or it may secure additional capital by adding new members to the partnership.

The principal disadvantage of the partnership form is found in the friction and indecision in the management of the business likely to result from the necessity of many men's uniting on a single policy. Moreover, the unlimited liability of the partners, and especially the fact that one partner may risk all of his property on the judgment of another member of the partnership, acts as a deterrent to the usefulness of this form. While the partnership has an advantage over the single enterpriser form in the greater ease with which it can secure capital, it in turn, as we shall see later, is less useful in this respect than the corporation. A further disadvantage of the partnership is to be noted in the fact that the death or insolvency of any one member results in the dissolution of the partnership.