A partnership is when two or more people partner up to engage in a business as co-owners. This kind of business agreement is very popular in legal and public accounting professions as well as with personal service enterprise. In partnership accounting, the co-owners or partners agree to combine their properties, labors and skills. It's a good idea to go into it with a good knowledge of basic accounting principles.
Partnership accounting is written in a contract agreed upon by the people involved and is bound by law. The contract or partnership agreement may specify that partners have to be compensated for the services provided to the partnership and for capital that has been invested by partners. An example is when a partner works full time in the partnership and has contributed more of the assets he is compensated more than the partner who has provided a smaller asset.
Partnership can also be family limited, in which family members combine their properties to be able to build a good business. It can also be done with business partners or people that are not related to each other.
Partnership accounting has different advantages and disadvantages. Advantages of partnership accounting include the following.
- Partnership allows bigger money to be pooled, which provides an opportunity for a better business. In addition to money, labor, skills and knowledge being shared by partners, there is an increase of success in the business.
- Partnership accounting is easy to organize because there can be more than one leader.
- It is subject to limited government regulations and does not face high tax rates.
And disadvantages of partnership accounting are the following.
- Each partner is subject to unlimited liability. This means that if the business fails, creditors can take action against both the partnership and the persons who are in it.
- Partners in the business are bounded by mutual agency wherein one partner can decide what needs to be done for the business without consulting the others.
- A partnership, especially if it is not family limited, has a possibility and is vulnerable to end anytime due to some reasons. Misunderstanding among partners is one of the most common reasons why partnership ends in an instant, thus causing the business to fail.
- In cases that a partner withdraws himself from the partnership, capital interest is provided. This is a share of the total profit that they have earned during their time of partnership.
Partnership accounting is not only associated in business but also in mental health. This happens when a person allows another person full authority on the information about his health status. It also allows the partners to check the types of treatment and care being rendered to them with full jurisdiction.
Liverpool is one of the countries that allows this kind of partnership and believe that this will promote good practice in mental health promotion. They also partner up with the community as a whole to ensure that each individual check each other for improvement in mental health.
Partnership accounting is very common right now because it allows greater heights for a better business opportunity. It's a great idea to enroll in an online school to take accounting and/or finance classes before beginning a partnership accounting arrangement, or even to register for some online business partnership law courses -that way, you can maximize the benefits. Partnership accounting expected to be more useful in the near future not only in business and health but also in different fields.