IV. Now describe the disadvantages of a sole proprietorship using just one sentence for each of them.

V. DISCUSSION

1. What is a start-up fee for a would-be entrepreneur in our country?

2. Try to analyze the advantages and disadvantages of a sole proprietorship by putting them on the scales. To your mind, what pan outweighs – the one with advantages or another one with disadvantages? Give your reasons.

 

VI. FOCUS ON GRAMMAR

Comparative and Superlative Degrees:

A) Complete the sentences using a comparative form; the first one has been done for you:

1. It’s too noisy here. Can we go somewhere quiter?

2. This coffee is very strong. I like it a bit ____________

3. The hotel was very cheap. I expected it to be ________________

4. I was surprised how easy it was to get a loan. I thought it would be _______________

5. You are standing too near the camera. Can you move a bit __________________ away?

B) Use the superlative degree and underline the correct variant:

1. (large) company in the world is (IBM, General Motors, Chrysler).

2. (rich) country in the world is (Russia, USA, Luxembourg).

3. (tall) building in Europe is in (Germany, France, Great Britain).

4. (USA, India, China) has (large) population.

5. (high) waterfall in the world is in (South Africa, USA, Venezuela).

 

 

Partnerships

Learning objectives:

1. Define the word partnership

Know different types of partners within a partnership and distinguish between a general and a limited partner

Comprehend the importance of the articles of partnership

Be aware of the advantages and disadvantages of a partnership

Study and Learn the Words:

English	English equivalents	Romanian	Russian
to translate	to change sth into a different form
receipt (n)		intrare, venit	приход
to pool		a uni, a pune în comun	объединять
real estate		avere imobiliară	недвижимое имущество
personal estate		avere mobilă	движимое имущество
to incur debts		a face datorii	влезть в долги
prospective partner	would-be partner
to file		a depune, a prezenta	предоставить
to draw up		a întocmi	составлять
Secretary of State		Secretar de stat	Государственный секретарь
the terms of the partnership		condiţiile parteneriatului	условия партнёрства
to list		a face o listă	предоставить список
to spell out	to explain sth in a clear way
to maintain accounts		a ţine contabilitatea	вести бухгалтерию
to extend credit	to lend money
concerned (adj)		preocupat, interesat	обеспокоенный, зaинтересованный
franchise (n)	a formal permission given by the government to sb who wants to operate a business
deceased partner	dead partner

 

The major disadvantages of a sole proprietorship stem from its one-person control—and the limited amount that one person can do in a workday. One way to reduce the effect of these disadvantages is to have more than one owner. Multiple ownership translates into more time devoted to managing, more management ex­pertise, and more capital and borrowing ability.

The Uniform Partnership Act, which has been adopted by many states, defines a partnership as an association of two or more persons to act as co-owners of a business for profit.

There are approximately 2 million partnerships in the United States. They account for about $370 billion in receipts. However, this form of ownership is much less common than the sole proprietorship or the corporation. In fact, partnerships represent only about 10 percent of all American businesses.

Although there is no legal maximum, most partnerships have only two partners. (However, most of the largest partnerships in accounting, law, and advertising have many more than two partners.) Often a partnership represents a pooling of special talents, particularly in such fields as law, accounting, advertising, real estate, and retailing. Also, a partnership may result from a sole proprietor taking on a partner for the purpose of obtaining more capital.

 

Types of Partners

All partners need not be equal. Some may be fully active in running the business, whereas others may have a much more limited role.

General Partners A general partner is one who assumes full or shared operational responsibility of a business. Like sole proprietors, general partners are responsible for operating the business. They also assume unlimited liability for its debts, including debts that have been incurred by any other general partner without their knowledge or consent. The Uniform Partnership Act requires that every partnership have at least one general partner. This is to ensure that the liabilities of the business are legally assumed by at least one person. General partners are active in day-to-day business operations, and each partner can enter into contracts on behalf of all the others. Each partner is taxed on his or her share of the profit—in the same way a sole proprietor is taxed. (The partnership itself pays no income tax.) If one general partner withdraws from the partnership, he or she must give notice to creditors, customers, and suppliers to avoid future liability.

Limited Partners A limited partner is a person who contributes capital to a business but is not active in managing it; his or her liability is limited to the amount that he or she has invested. In return for their investment, limited partners share in the profits of the firm.

Not all states allow limited partnerships. In those that do, the prospective partners must file formal articles of partnership. They must publish a notice regarding the limitation in at least one newspaper. And they must ensure that at least one partner is a general partner. The goal of these requirements is to protect the customers and creditors of the limited partnership. Partners can also be nominal, ostensible, active, secret, dormant, or silent. What type of partner individuals choose to be depends a great deal on how much involvement they want in a particular business or what special abilities they bring to a firm. The six different types of partners have the following characteristics:

1 Nominal partner: not a party to the partnership agreement or a true
partner in any sense; by adding his or her name to the partnership, becomes liable as if he or she were a partner if persons have given credit to the firm because of such representation

2. Ostensible partner: active and known to the public as a partner

3. Active partner: active in management but may or may not be known to the public

4. Secret partner: active, but not known to the public as a partner

5. Dormant partner: inactive and not known as a partner

6. Silent partner: inactive, but may be known to the public as a partner

 

The Partnership Agreement

Some states require that partners draw up articles of partnership and file them with the secretary of state. Articles of partnership are a written agreement listing and explaining the terms of the partnership. Even when it is not required, an oral or written agreement among partners is legal and can be enforced in the courts. A written agreement is obviously preferred because it is not subject to lapses of memory.

The articles gen­erally describe each partner's contribution to, share of, and duties in the business. They may outline each partner's responsibility—who will main­tain the accounts, who will manage sales, and so forth. They may also spell out how disputes will be settled and how one partner can buy the interests of another.

 

Advantages of Partnerships

Ease and Low Cost of Formation Like sole proprietorships, partnerships are relatively easy to form. The legal requirements are often limited to registering the name of the business and purchasing whatever licenses are needed. It may not even be necessary to consult an attorney, except in states that require written articles of partnership. However, it is generally a good idea to get the advice and assistance of an attorney when forming a partnership.

Availability of Capital and Credit Partners can pool their funds so that their business has more capital than would be available to a sole proprietorship. This additional capital, coupled with the general partners' unlimited liability, can form the basis for a good credit rating. Banks and suppliers may be more willing to extend credit or grant sizable loans to such a partnership than to an individual owner.

This does not mean that partnerships can easily borrow all the money they need. Many partnerships have found it hard to get long-term financing simply because lenders worry about enterprises that take years to earn a profit. But, in general, partnerships have greater assets and so stand a better chance of obtaining the loans they need.

Retention of Profits As in a sole proprietorship, all profits belong to the owners of the partnership. The partners share directly in the financial rewards. Thus they are highly motivated to do their best to make the firm succeed.

Personal Interest General partners are very much concerned with the operation of the firm—perhaps even more so than sole proprietors. After all, they are responsible for the actions of all other general partners, as well as for their own.

Combined Business Skills and Knowledge Partners often have comple­mentary skills. If one partner is weak in, say, finances, another may be stronger in that area. Moreover, the ability to discuss important decisions with another concerned individual often takes some of the pressure off everyone and leads to more effective decision making.

Possible Tax Advantages Like sole proprietors, partners are taxed only on their individual income from the business. The special taxes such as the state franchise tax that corporations must pay are not imposed on partnerships. Also, at certain levels of income, the new federal tax rates are lower for individuals than for corporations.