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|Legal Subjects > Business Law > Partnerships|
WHAT IS PARTNERSHIP ?
Partnership is one type of business organization in Malaysia. The business exists when at least two persons agree to carry on a business in common with a view to profit.
The legalities required to set up a partnership are minimal and is similar to that of sole proprietorship.
As like sole proprietorship, a partnership does not exist as a separate legal entity.
Partnership normally spring up between friends.
However, it is advisable to have a formal Partnership agreement drawn up by a solicitor. The agreement should state the responsibilities of each partner, on what grounds and how the partnership may be terminated and the procedure for dealing with disputes between the partners.
Partnership Agreement is in fact an absolute necessity. It's better to anticipate a situation and its problem and deal with them well in advance.
WHO IS ELIGIBLE TO REGISTER A BUSINESS AS PARTNERSHIP ?
Only Malaysian citizens and permanent residents can register a business as partnership.
WHAT ARE THE ADVANTAGES OF PARTNERSHIP ?
Partnership is easy to get off the ground.
It provides a wider capital base compare to a sole proprietorship. In a partnership, partners pool their capital and work together in business.
If you need to operate a business where different skills can be utilized, partnership is an excellent arrangement. Each partners can contribute to the business be it specific knowledge, skills or strong contacts.
You can also overcome certain difficulties that you may experience as a sole proprietor.
WHAT ARE THE DISADVANTAGES OF PARTNERSHIP ?
You will have to liable for debts of the partnership even if it is caused by the actions of other partners. With unlimited liability, each partner is also liable to use their private resources to meet the partnership's debts.
At personal level, you face the risk that partners may not be able to work together. Nobody guarantees that disagreements will not occur.
Even though a partnership provides a wider capital base compare to a sole proprietorship, the capital for expansion may still be limited unless additional partners are brought in.
There is lack of succession in a partnership. A partnership ends if any one of the partners resigns or dies.