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Characteristics of Partnership

Last Updated on March 9, 2022 By Lisa C. Townes 1 Comment

The partnership is the most common form of business structure. In this, a minimum of two persons combine their investments, abilities, experiences, and other things to start a business. The maximum number of partnerships varies in every country. A partnership is different from a sole proprietorship but also the same to some extent.

Like Sole proprietorships, owners manage all business parts to grow and earn handsome profits. Adding different talent in the business, personal relations, experiences, and capital is a few of the most important benefits of the partnership. Although, we can not neglect the disadvantages

Top 12 Characteristics of Partnership

If you are willing to start a business in partnership, you can do it orally or written. It means you need to set some duties, roles, profit sharing decisions, management decisions, and a number of other things.

Keeping them in writing is best practice, that piece of paper is circulated among partners and also shown to the registration authority in your country. If you are going to write it, you must consider the most important contents of the partnership deed.

1. Agreement

There must be an agreement between the parties concerned. These are the most important characteristics of a partnership. Without the agreement, the partnership cannot be formed. “No agreement no partnership.” But only competent persons are entitled to make a contract. There are some set conditions in a joint business deed.

These are determined clearly before the commencement of business. But it differs from business to business. These documents may be written or oral. But it must be written so that disputes may be settled according to the provisions of the agreement.

2. Number of Partners

There should be more than one person to form a partnership. Types of business partners can be any but there is a restriction for the maximum number of partners. In the case of ordinary business, the partners must not exceed 20 and in the case of banking must not exceed 10 (before nationalization).

3. Business

The objective of partnership formation is to carry on any type of business. It may be manufacturing or merchandise type small or large scale business but it should not be an illegal business in the country concerned.

4. Profit Motive

The basic motive of the formation of a partnership is to earn a profit. The more sales you generate the more profit you make. Its partner’s duty is to distribute it according to the agreed proportion. If there is loss it will be sustained by all partners except the minor.

5. Conduct of Business

The partnership business is conducted by all the partners or any of them acting for all. But each partner has right to participate in the management by law.

6. Entity

It has no separate entity apart from its members. It is not independent of the partners. Law has not granted it any legal entity. Registration of Partnership Business to make it legal and gain more people’s trust.

7. Unlimited Liability

This is the prominent feature of partnership that the liability of each partner is not limited to the amount invested but his private property is also liable to pay the business obligations.

8. Investment

Each partner contributes his share in the capital according to the agreement. Some persons become partners without investing any capital in the business. But they devote their time, energy, and ability to their business instead of capital and receive profit.

A combination of Monetary investment and time investment can develop a strong business brand.

9. Transfer-ability of Share

There is a restriction to transfer the share from one partner to another person without the consent of existing partners. So, the investment in the partnership remains confined to a few hands.

10. Position

One partner is an agent as well as the principal to another partner. He can bind the other person by his act. In the position of an agent, he can make a valid contract with another person or parties on behalf of his concerned firm.

11. Mutual Confidence

The business of the partnership cannot be conducted successfully without the element of mutual confidence and cooperation of partners. So the members must have trust and confidence in each other. Lack of mutual confidence is a drawback of partnership.

12. Free Operation

There are no strict rules and regulations to control the partnership activities in a few countries i.e., no restriction for the audit of accounts, submission of various reports, and other copies to any government authority. So this organization may operate freely without any interference.

If, Limited Partnership

A limited partnership is that form of organization in which the liability of some persons is limited, to the amount of capital which they have contributed to the business and certain persons are liable for all the obligations of the firm. The main characteristics of a limited partnership are as under:

Limited Partner: There must be at least one limited partner.

General Partner: There must be one or more persons with unlimited liability who are liable for all debts of the firm, they are called general partners.

The number of members: There are at least two members but not more than twenty ordinary businesses and not more than ten in the banking business.

Restriction for participation: Limited partners are not allowed to participate in the management of the business. So one partner cannot bind other persons by his act.

Inspections of books: Limited partners may inspect, verify and copy all types of accounts, records, and books at any time.

Compulsory Registration: Registration is compulsory by law. With the registration of the firm, the rights and liability of partners have also been registered.

Admission of a New Partner: New partners may be admitted in this kind of partnership without the consent of the limited partner.

Separate Legislation: It is controlled under the limited partnership act 1907.

Withdrawal of Capital: Limited partner cannot withdraw his capital from the business until he remained a limited partner.

Transferability of share: The share of the limited partner can be transferred to another partner with the consent of all general partners.

Conditional participation in management: If a limited partner conducts the management of a business, he will be liable for all the obligations of the firm.

Proposals and advice: Limited partner is entitled to give his proposals and advice to active partners.

lisa
Lisa C. Townes

Lisa is a passionate travelers. She spends 3 months every year visiting different places worldwide. She has visited almost every famous place in the world. She herself is an affiliate blogger

Filed Under: Commerce

Advantages and Disadvantages of Paper Money [ Updated with Types ]

Last Updated on March 16, 2021 By Lisa C. Townes Leave a Comment

Paper Money defined as currency note used as medium of exchange and issued by State Government. People consider currency notes is a kind of money which performs all the function as good medium of exchange.

Paper currency is convertible in the sense that it may convert in to gold and precious metals while it may inconvertible because it is not exchangeable in to coins.

Now a day’s, Like Credit Cards (form of plastic money) paper money got more popularity than other forms of money.

4 Types of Paper Money

  • Representative Paper Money
  • Convertible Paper Money
  • Inconvertible Paper Money
  • Fiat Money

Advantages and Disadvantages of Paper Money

Life and death, Plus and Minus, Right and Left, Up and Down. There are always two aspects of each thing we see in our everyday life. Similarly, Paper money has pros and cons too. It is easy to produce, move paper money Economically and Humanly but it is also shorter in life.

Advantages of Paper Money
• Economical
• Elastic
• Stable Price
• Non Cyclical
• Quickly Usable
• Easily Countable
• Easily Movable
• Storable
• Acknowledged
Disadvantages of Paper Money
• Inflationary
• Unstable Price
• Shorter Life
• Uncertain
• No Automation
• Unstable

Advantages of Paper Money

Paper Money is Economical

Currency Notes is economical in the sense that its face value is greater than intrinsic value. Cost of production is less than other forms of money. Like dollar note in USA is an example of Paper money.

Paper Money is More Elastic

Elastic means that its supply could be controlled easily. Government print more notes if there is higher demand and produce less if there is less demand. So, Government manages its production according to the requirement of an economy.

Price Stability

This kind of medium of exchange brings more price stability in an economy than other. Currency standard manage the mechanism of monetary policy. Price stability merit of paper currency reveals equality between its demand and supply.

Paper Money Free From Cyclical Fluctuations

In previous era cyclical fluctuations highly influenced the money standard especially gold. Cyclical fluctuations in business cycles transform from one country to another country which simultaneously influence the economy of trading partners. But after the evolution of paper currency this problem removed easily. While cyclical fluctuations do not influence the paper money.

Quick Usability

Currency Notes has the characteristic of quick usability because it is legal tender money. This kind of medium of exchange has the characteristic of easy acceptability because each note issued against certain amount of foreign security and gold reserves.

Paper Money Count Quickly

In the era of metal, people consume more time in counting. But paper money facilitates people in this regard. Now people count large amounts in few minutes and save their time.

Easy to Move

People use paper currency because it is easily transferable from one place to another place. While in case of gold standard it was difficult to move from one place to another place. So, Paper Currency is easy to transfer.

Safely Store

In gold standard people faced difficulties regarding the money security and sometimes they kept their savings to other persons. Large amounts increased the fair of theft but invention of paper currency reduces all these perceptions. Paper money could be accumulating easily because people will never face the problem of debasement or theft.

Greater Acknowledge

In previous era of money standard people lose confidence due to the problem of coin debasement; this is mostly happened in gold standard. But in case of paper Money highly acknowledge due to the lack of debasement.

Demerits or Disadvantages of Paper Money

Brings More Inflation

Government prints new notes without keeping specific reserves in their valet’s. The excessive new notes printing increases the amount of money supply which further promotes inflation in an economy. This situation decreases the value of paper currency. While in case of gold standard there were less chances of inflation.

Unstable Exchange Rate

Another drawback of paper money is instability in exchange rate; wide fluctuations in external price against internal price negatively influence the international trade and domestic economic growth. Government adopt some polices to overcome such problems.

Lack of Long Lasting

This form of medium of exchange has faced the problem of durability because it can be destroy by insects and fire. While in case of gold standard people were easily stored it without any fear. So, currency notes lose the feature of long lasting.

Brings Uncertainty

Excessive amount printing new notes bring instability in the value of paper currency. These variations in paper money shattered the confidence of people and negatively influence business and economic growth.

Lack of Automation

Lack of automation is another drawback of paper money because it requires Government and monetary authority involvement. Without the interference of certain authorities that medium of exchange ruins the economy.

Unstable

Paper currency considers unstable because Government can easily increases or decreases its supply through printing new notes while ignoring the specific reserve condition.

lisa
Lisa C. Townes

Lisa is a passionate travelers. She spends 3 months every year visiting different places worldwide. She has visited almost every famous place in the world. She herself is an affiliate blogger

Filed Under: Commerce

15 Key Difference Between Sole Proprietorship and Partnership

Last Updated on July 29, 2021 By Lisa C. Townes Leave a Comment

Thinking to start a business having options of starting your own business or getting partners for that? Might be thinking that is partnership better than a sole proprietorship or sole traders is better than a partnership.

Here are 15 key variations between Sole Proprietorship and Partnership to help you to make the right decision considering your present conditions.

Both Personal businesses & partnerships have few similarities as they can be started with and without partnership deed, can be started and closed anytime with consent but differences are another side of the coin.

Possibly, the advantages of a partnership are better than sole proprietorship advantages or disadvantages of a sole proprietorship are worst comparing to partnership disadvantages

Difference Between Sole Proprietorship and Partnership

Sole Proprietorship
• Easy Formation
• One Owner
• No Contract Required
• Limited Capital
• Presence Required
• All Profit & Loss by One
• Easily Transferable
• The decision in one Hand
• Stable Business
• Everything is Secret
• Limited Ability
• All Expenses by One
• Easy Dissolution
Partnership Business
• Little Complicated Formation
• More than One Owner
• Legal Contract is Preferred
• More Capital Investment
• Can be away from Business
• Profit Loss Distributed in Partners
• Complex Transfers
• Multiple Heads to Decide
• Risk of Stability
• Secrets are Revealed
• Enhanced Ability
• Expenses are Shared
• Complex Dissolution

Business Formation

  • It is easy to form and simple to run. There are no legal formalities for the commencement of sole proprietorship business. It can be started within minutes
  • Partnership deed and such other legal documents are necessary for the formation of the partnership. Every business activity, responsibilities, capital or profit sharing must be mentioned here. There are more than 27 important contents of partnership deed to note down

Number of Partners

  • In sole proprietorship, there is no concept of more than one person.  Business is owned by one person only
  • There are at least two people in each type of partnership but no more than twenty in ordinary business and ten in banking. You can have more partners in Joint stock companies

Contract

  • There is one concept of any contract type due to one man. He/She has all decision powers
  • It is created by contract. An agreement is the most important element for partnership. No contract means no partnership, it may be oral or written but recommended is written

Capital

  • As one man invests his amount into his business, capital volume remains limited
  • Capital is contributed by two or more than partners. Therefore capital volume may be increased by admitting new partners

Personal Presence

  • Its management was to be conducted by one man only.  Therefore personal presence is compulsory. It won’t be managed without personally involving in proprietorship
  • This kind of business may be conducted by one or two partners only. Therefore the personal presence of each partner is not necessary

Profit & Loss sharing

  • One man enjoys a hundred percent profit of the business and if there is a loss he has to sustain all the losses
  • The partnership’s prominent feature is profit and loss are distributed among all the partner of the firm. In case of loss, each partner may and may not feel a heavy burden

Rights Transfer

  • Sole proprietor may easily transfer his business without the consent of another person
  • One partner, cannot dispose off or transfer his business without the consent of all other partners

Power of Decision Making

  • One man is the supreme authority of his business. Therefore he may take any action against any matter promptly
  • All the matters are decided by mutual consultation. Therefore matters may not be disposed of promptly

Business Accountability

  • As all business is owned by one man he has not be obeyed any order. So there is no fear of being accountable to anyone
  • As partners are accountable to one another, they have to keep an up-to-date record and correct information in connection with their business

Expansion of Business

  • There are limited chances for the growth of business due to lack of capital and managerial abilities
  • There are more chances to expand the business volume due to a large number of partners

Business Stability

  • There is no possibility of distribution due to one man. So this type of business may be run smoothly
  • There is always a risk of dissolution due to misunderstanding and friction among the partners

Business Secrecy

  • Secrecy may be maintained in this form of organization on account of man supervision
  • As every partner knows about the internal affairs of the business so there are great chances of leakage of the secrecy

Abilities to Work

  • One man cannot possess all types   of technical and administrative abilities
  • As there are a number of partners so firm may enjoy the combined abilities of several heads

Expenses Distribution

  • There are minimum expenses to organize and operate this form of organization
  • Partners have to pay legal fees, registration fees and other expenses. Therefore it is a costly organization comparatively.

Dissolution

  • This kind of business may be dissolved easily without any legal formalities
  • A partnership may not be dissolved without fulfilment of legal obligations
lisa
Lisa C. Townes

Lisa is a passionate travelers. She spends 3 months every year visiting different places worldwide. She has visited almost every famous place in the world. She herself is an affiliate blogger

Filed Under: Commerce

Workmen Compensation ACT 1923

Last Updated on February 26, 2020 By Lisa C. Townes Leave a Comment

The workmen compensation Act 1923 is the first measure of social security introduced in 1923 came into force from 1st July 1924. The workmen compensation is an act to provide for the payment by certain classes of employers to their workmen of compensation for injury by accident.

Importance of Workmen Compensation ACT 1923

It has been of great help to the employee and the employer both. There was much confusion in all cases of accidents before the introduction of this Act. Its proceedings were long drawn time-consuming and sheer wastage of time and natural resources.

The workmen compensation Act has abolished all the problems and difficulties. It declares the employee to get entitled to take benefit from the law without negligence. Under this Act 1923, the issue is as to whether the injury was accidental and arose out of and in the course of his employment and if the answer is yes, he would be entitled to get compensation, otherwise not.

The workmen compensation Act perform a great service to both the parties i.e. the employee and the employer. It provides a very simple procedure for the recovery of compensation.

It makes the possible to know, how much is to be paid, as schedules for different types of casualties are provided in the Act.

The workmen or his dependent are at liberty to either live a suit for damage against the employer and run the risk of the employer’s escape from liability.

So it is intended to promote the welfare of the public community and it does not concern itself with the measure of preventive nature.

Employer’s Liability under Workmen Compensation ACT 1923

In case of injury

Sec 3 of the workmen compensation Act 1923 provides that if personal injury is caused to a workman by accident arising out of and in the course of his employment, his employer shall be liable to pay compensation.

In the case of Physical Disease

Besides bodily injury, the section provides for employers liability to pay compensation to an employee of his if the employee contracts any of the occupational diseases mentioned in the schedule III.

Amount of Compensation

The amount of compensation will be determined by two factors i.e. (1) the number of wages (2) the nature of the injury.

According to section 4 of the Act 1923, the amount of compensation shall be as follows.

Where Death Result from the Injury:

Where death results from the injury to workmen in receipt of monthly wages failing within the limits of Rs.3000 as shown in the first column of schedule IV, the amount of compensation will be Rs.2,00,000.

Where Permanent Total Disablement results from the Injury

Where permanent total disablement result from injury to a workman in receipt of monthly wages falling within the limits of Rs.3000 as shown in the first column of schedule Iv, the amount of compensation will be Rs.2,00,000.

Where Permanent Partial Disablement results from the Injury

Specified in Schedule

In case of an injury specified in the schedule, I, such percentage of the compensation which would have been payable in the case of permanent total disablement as is specified therein as being the percentage of the loss of earning capacity caused by that injury, and.

Not Specified in schedule I:

If any sort of injury isn’t specified in Schedule I, Permanently Earning capacity loss due to that specific loss is proportionate to payable compensation.

Temporary Total or Partial Disablement

Where temporary total or partial disablement results from the injury, ½ of the monthly wages will be payable during the period of disablement or a period of one year, starts from the date of injury, whichever is less and thereafter only in case of chronic lung disease 1/3 of the monthly wages will be payable during the period of disablement or for a period of five years, starts from the date of injury, whichever is less.

lisa
Lisa C. Townes

Lisa is a passionate travelers. She spends 3 months every year visiting different places worldwide. She has visited almost every famous place in the world. She herself is an affiliate blogger

Filed Under: Commerce

Difference between Partnership and Company

Last Updated on February 20, 2020 By Lisa C. Townes Leave a Comment

Sole proprietorship, Partnering business, Public and Private limited are few forms of business organization. Everyone has different features as well as advantages and disadvantages. Starting a business may be hard without knowledge of a country’s law.

UK Company law may be different from Germany. In general, the basics are the same. In this reading, you’ll be able to analyze the difference between Partnership and Company [Public Limited].

The Difference Difference between Partnership and Company

Partnership
• Easy Formation • Full Liability • Two to Twenty Seven Partners • Unable to Transfer • No Entity • Easy Capital Management • Accounts at own choice • Can manage Business • Distribution in Partners • Audit isn’t mandetory • Easy Termination • Cannot sale business shares • Short Life • No Reports required • Can Change business • Meeting are not necessary
Company
• Complex Formation • Limited Liability • Minimum Seven Members • Easily Transfer • Legal Entity • Share holders acceptance is required • Every thing in accounts • Board of Directors manage business • Distribution in share holders • Audit is mandetory • Hard Dissolution • Can sale business shares • Long Life • Reports required • Can not change it easily • Should do Meetings

1. Formation

Public Limited Company

There is a long and complicated process for the formation of public company. Many legal documents are to be prepared and submitted to the registrar’s office which requires long time.

Partnership

There is a simple process for the formation. No legal documents are necessary. Agreement by oral or written is required only for formation.

2. Liability

Public Limited Company

The liability of share holders is limited to the unpaid value of the share holders are not liable to settle the obligations of the company.

Partnership

It is one from the biggest disadvantages of partnership is that every partner had unlimited liability in his firm. It means that the liability of partners is not limited to the invested amount but private assets are also liable to clear the liabilities of the firm.

3. Number of Members

Public Limited Company

There is no restriction for the maximum numbers of members. It may be million or thousand but not less than seven.

Partnership

It consist of at least two partners but not more than twenty in case of ordinary business and not more than ten in case of banking business.

4. Transferability

Public Limited Company

There is no restriction for transforming of share of public company shareholders may easily dispose of their share in the stock exchange market.

Partnership

A partner cannot transfer his share and interest to another persons without the consent of existing partners.

5. Entity

Public Limited Company

It is created by law and posses separate legal entity. So it can purchase property in its own name. it can sue in its separate position.

Partnership

The partnership’s important feature is to not having separate legal entity from its members. Partners cannot be separated from the firm.

6. Capital

Public Limited Company

Its authorized capital is mentioned in the memorandum of association. It can be increased or decreased by special resolution which is passed in the share holders meeting after the sanction of court.

Partnership

Its capital is described in the agreement. It may be changed by mutual consent of the partners.

7. Maintenance of Books

Public Limited Company

Statutory books and other account books are to be maintained law.

Partnership

There is no compulsion to keep statutory or definite books. Each partner is allowed to inspect and copy the accounts.

8. Legislation

Public Limited Company

The activates of the public companies are controlled by the company ordinance 1984.

Partnership

It is controlled by the partnership Act 1932 which was adopted in our country after partition.

9. Management Authority

Public Limited Company

Share holders who are the actual owners of the company are not allowed to participate in the activities of the company. but board of directors is elected by the share holders which is elected by the share holders which is considered supreme authority of the company. so all the activities are conducted by these persons.

Partnership

Each partner is allowed to conduct personally the business activities. But generally one or two partners are selected to manage the firm.

10. Profit

Public Limited Company

Profit is distributed among the share holders according to the provision of Articles and decision of the Board of Directors.

Partnership

It is distributed among the partners according to partnership deed.

11. Audit

Public Limited Company

Accounts must be audited by the qualified chartered accountant according to the companies ordinance.

Partnership

Audit is not compulsory by law but it depends upon the agreement.

12. Dissolution

Public Limited Company

It cannot to dissolved easily. There is a separate legal process for the winding up of company. it can be wound up according to the provision of company Act.

Partnership

It can be dissolved easily by mutual consent of the partners. It may be dissolved by any one of the partners by serving notice of fourteen days to other partners

13. Right of Issue

Pubic Limited Company

It can issue shares, debentures and other securities to increase its capital and business fund

Partnership

It cannot issue any type of securities in the market to increase its financial sources.

14. Life

Pubic Limited Company

It has continued existence. The life of the directors and shareholders is not connected with running business life of the company. so its activities are not affected by the retirement or death of any shareholders.

Partnership

It does not possess long life. Its business may be affected by the death insolvency or retirement of any partner.

15. Submission of Reports

Pubic Limited Company

Certain documents, statements and reports must be submitted to the government authority.

Partnership

There is no restriction to submit the various reports and documents to any authority.

16. Business

Pubic Limited Company

The promoters are restricted to carry on business which in mentioned in the object clause of memorandum of association.

Partnership

Partners may carry on any type of business and it may easily be changed by mutual consultation.

17. Meeting

Pubic Limited Company

It has to call necessary meetings of shareholders in which problems are disposed of by various resolutions.

Partnership

No compulsion to call any type of meeting and submission of reports to the registrar.

Difference Between Partnership & Public Limited Company

Partnership
• It is controlled under the limited partnership act, 1907 • There are at least two members and a maximum of 20 members in case of ordinary business and 10 in the banking partnership. • It has no legal entity. It is not independent of the partners. • There are two classes of partners in limited partnership i.e. ordinary partners (Unlimited liability partner) and limited liability partnerships. • Certificate of incorporation is not needed by the limited partnership.   Business can be commenced immediately after the agreement • Its management is conducted according to the provision of the partnership agreement. But generally, business is carried on by one or two partners Limited   partner is not allowed to participate in the business • There is no retraction to audit the accounts from the chartered      accountant by lass but it depends upon the partnership agreement • There must be a limited partner and one unlimited liability partner for the formation of this type of organization. • Partners may conduct any type of business or change it by mutual consent. • No legal documents are required to be submitted to the registrar ’s office before its formation. • There is no compulsion to hold any meeting under the Partnership       Act, 1932. No reports are required to be filled with any office. • Its capital is laid down in the Articles of Partnership   (Partnership deed). It may be changed easily to be mutual consent. • Business profit is distributed among the partners according to the partnership agreement. • Tax is imposed on the individual profit of the partners. • Its internal management is conducted by a partnership deed. • The partnership may be dissolved on the retirement or death of any partner. In the case of an insolvent, the Insolvency Act applies
Public Limited company
• Its activities are controlled by the Company ordinance, 1984. • Minimum number of members is two but not more than fifty • It enjoys a separate entity and a common seal. Its existence is independent of the members. • There is only one class of members i.e. shareholders with limited liability. • It can commence business only after obtaining the certificates of incorporation from the register’s office. • It procedure of management is laid down in the Articles of Association Each member has the right to conduct its business personally • It has to keep the accounts books and statutory books. An annual audit is compulsory by Company Ordinance. • It can commence its business with at least two members with limited liabilities • The nature of the business is mentioned in the object clause of the Memorandum of Association. It cannot be changed except by the sanction of the court. • Some legal documents i.e. Articles of Association are necessary to be submitted to the registrar’s office along with other documents before its incorporation • Some specific meeting must be held within prescribed time under the provision of Company ordinance. Specific reports are to be submitted to the concerned office • Its capital is mentioned in the Memorandum of Association. It cannot be changed without the sanction of the court. • The Policy of the distribution of profit is decided at the Board of Directors Meeting according to the provisions Articles of Association. • Tax is paid by the company on the whole of its profit. • Its internal activities are controlled by the Articles of Association. • It enjoys continued existence. Its running business life is not dissolved on the death or retirement of any member. There is a separate legal procedure for the winding up of the company. Insolvency act may not apply.

Difference Between Partnership and Private Limited Company

Limited Partnership
1 • It is controlled under the partnership Act 1932 2 • There are at least two members and a maximum of 20 members in case of ordinary business and 10 in the banking partnership 3 • It is no legal entity. It is not independent of the partners 4 • There are two classes of partners in limited partnership i.e. ordinary partners (unlimited liability partners) and limited liability partner 5 • Certificate of incorporation is not needed by limited partnership. Business can be commenced immediately after agreement 6 • Its management is conducted according to the provision of partnership agreement 7 • But generally business is carried on by one or two partners. Limited partners is not allowed to participate in the business 8 • There is no restriction to audit the accounts from the chartered accountant by law, but it depends upon the partnership agreement 9 • There must be one limited partner and one unlimited liability partner for the formation of this type of organization 10 • Partners may conduct any type of business or change it by mutual consent 11 • No legal documents are required to be submitted to the registrar’s office before its formation 12 • There is no compulsion to hold any kind of meeting under partnership act 1932. No reports are required to be filed with any office 13 • Its capital is laid down in the Articles of partnership (partnership deed) it may be changed easily by mutual consent 14 • Business profit is distributed among he partners according to the partnership agreement 15 • Tax is imposed on the individual profits of the partners 16 • Its internal managements is conducted by partnership deed 17 • Partnership may be dissolved on the retirement or death of any partner. In case of insolvent, the insolvency act applies
Private Limited Company
1 • Its activities are controlled by the companies’ ordinance 1984 2 • A minimum number of members is two but not more than fifty 3 • It enjoys a separate entity and a common seal. Its existence is independent of the members 4 • There is only one class of members i.e. shareholders with limited liability 5 • It can commence business only after obtaining the certificate of incorporation from the registrar’s office 6 • Its procedure of management is laid down in the Articles of Association. Each member has the right to conduct its business personally 7 • It has to keep the accounts books and statutory books. An annual audit from any person is compulsory 8 • It can commence its business with at least two members with limited liabilities 9 • The nature of business is mentioned in the object clause of the Memorandum of Association, it cannot be changed except by the sanction of the court 10 • Some legal documents i.e. Articles of Association and Memorandum of Association are necessary to be submitted to the registrar ’s office along with other documents before its incorporation 11 • Some specific meeting must be held within prescribed time under the provision of Company ordinance. Specific reports are to be submitted to the concerned office 12 • Its capital is mentioned in the memorandum of Association it cannot be changed without the sanction of the court 13 • The policy of the distribution of profit is decided at the Board of directors Meeting according to the provision of Articles of Association 14 • Tax is paid by the company on the whole of its profit 15 • Its internal activates are controlled by the Articles of Association 16 • It enjoys continued existence. Its running business life is not dissolved on the death or retirement of any member. 17 • There is a separate legal procedure for the winding up of the company. insolvency act may not apply.
lisa
Lisa C. Townes

Lisa is a passionate travelers. She spends 3 months every year visiting different places worldwide. She has visited almost every famous place in the world. She herself is an affiliate blogger

Filed Under: Commerce

14+ Disadvantages of Partnership Business | Firm – Beware

Last Updated on August 28, 2020 By Lisa C. Townes Leave a Comment

A partnership can be formed without any legal formalities. Like sole traders, it is easy to form and simple to run. The partnership may be dissolved without performing any legal process. It does not possess a legal identity apart from its members but if you have written it clearly in contents of partnership deed, you may need to visit the court. There are much Partnership demerits that may be ranked differently by different writers but to me the biggest demerit is trust.

From the operating standpoint, the partnership may conduct business in very much the same manner as a sole proprietorship. The partnership is not liked more than other forms of the organization due to the following Disadvantages of the partnership business.

Disadvantages of Partnership
• Limited Capital
• Unlimited Liability
• Quick Decission is Hard
• Hard to Supervise
• Absense of Perpetuity
• Hard to Expand
• Interest Problems
• Disclousure Chances
• Limited Abilities
• More Friction
• Less Confidence
• Harder to Transfer
• Risk Factor
• Unfit for Large Business
Advantages of Parntership
• Easy Start
• Sufficient Capital
• Public Interest
• Simple Dissolution
• Combined Abilities
• Protection by Law
• More Personal Interest
• Light Legal Restrictions
• Expand Easily
• Multiple Management Minds
• Business Privacy
• Morally Promoted
• Zero Fraud Chances

Disadvantages of Partnership Business | Firms

disadvantages of partnership

Limited Capital

As the number of partners is limited in this form of organization so the capital remains limited. When the capital cannot exceed to a particular limit, large size business may not be started.

Unlimited Liability

This is a great characteristic of the partnership that the private property of each partner is also liable to pay business debts. This factor prevents the rich man to invest large capital in such a risky business.

Lack of Prompt Decision

The number of partners creates the problem to reach a certain decision. So the difference of opinion is the great hindrance in promptness of decision. This delay brings many problems in internal communication & marketing purposes as well as in Production and management decisions.

Lack of Supervision

There are no effective rules and regulations to control the activities of partnership in our country. Audit and publication of accounts are not compulsory by law for a partnership firm. So the lack of supervision has increased the chances of manipulation and fraud in accounts.

Absence of Perpetuity

A partnership has not the capacity of continued existence. The life of the partners is connected with the running life of the partnership business. This may come to an end by the death, retirement, insolvency or disagreement of any partner.

Expansion Problems

The business of the partnership may not be expanded due to the following factors:

  • The limited number of partners.
  • Limited capital and financial sources.
  • Unlimited liability.
  • Lack of managerial and technical abilities.

But the business of the different types of joint Stock company may easily be increased due to the absence of the above-mentioned factors.

Lack of Interest

Partners do not take a keen interest in the business activities of the firm due to the following reasons:-

  • The limited share of Profit or loss of each partner.
  • Limited chances of growth of a business.
  • Restriction in the transferring of shares.
  • Frozen investment.
  • Limited life of the business.

Thus the result in the absence of personal interest is the success or failure of the business.

Chances of Disclosure

Each partner is allowed to participate in the management of the business by law. So all partners know the internal affairs of the business. In case of withdrawal, dis-agreement or retirement of partners, there will be a great risk of leakage of the secrecy.

Limited Abilities

It is really hard to engage or hire highly qualified team because financial resources in the partnership are limited to some level. Whereas joint stock company advantages in this as it can boom. There are chances of dissolution in partnership because of few resources.

Chances of Friction

There should be mutual co-operation and trust among the partners and these factors are necessary’ for successful achievement of the business. But generally, there is misunderstanding, friction, and dispute among the partners which hamper the progress of the firm.

Lack of Confidence

As there is no compulsion by law for the publication of accounts in partnership so true picture cannot come to the notice of the public. Due to this situation people do not trust partnership firm and avoid to deal with and enter into a contract.

Transferability of Shares

There is a restriction to transfer the share without the consent of existing partners. If a partner transfers his share without obtaining consent, the firm may be dissolved. Thus investment remains concentrated into few hands.

Risk of Loss

As the management of the partnership generally conducted by unskilled and inefficient persons, there are great risks of losses. In case of heavy losses, the business may come to an end. But in the joint stock company the amount of losses is sustained by the number of shareholders and so business is not affected by such a situation.

Unfit for Large Scale Enterprise

This form of organization is quite unsuitable for large and heavy business due to the following reasons:

  • A limited number of partners.
  • Limited capital.
  • Lack of technical and administrative abilities.
  • Limited life.
  • Unlimited liability.
  • In-sufficient rules and regulation.

But foregoing factors are not found in Joint Stock Company so this form is suited for large-scale business.

Final Conclusion

In the business world, every business type has its own importance with different pros and cons. The accumulative effect of all these make market which generates employment opportunities, increase GDP, circulate money, bring competition in a market that ultimately reduce prices and improve product quality.

The combined business is better but the darker side of the partnership business may not be easy to tolerate by investors.

lisa
Lisa C. Townes

Lisa is a passionate travelers. She spends 3 months every year visiting different places worldwide. She has visited almost every famous place in the world. She herself is an affiliate blogger

Filed Under: Commerce

27 Most Important Contents of Partnership Deed

Last Updated on March 8, 2022 By Lisa C. Townes 2 Comments

A partnership Agreement or Partnership deed is the most important paper or document in Partnership. It includes all the rights, liabilities, roles of each partner, and also govt. rules. Entrepreneurs in the sole proprietorship or partnership have some predefined goals and work to achieve them.

As being alone, the advantage of a sole proprietorship is that there is no need to note down anything. All decisions are made by the owner. But in partnership, everything must be discussed and written in Contents of Partnership Deed to run the business smoothly.

Importance of Partnership Deed

The partnership agreement may be oral or written or implied conduct of parties. One of the most important attributes of the partnership deed is that it is necessary to have the agreement in writing. So, in case of dispute or misunderstanding among the partners, it may be removed according to the provisions of this document.

It must be drafted by a lawyer and written on a judicial paper. It should be stamped according to the provision of the Partnership. Act of 1932. A partnership deed must be signed by all the partners concerned. It is highly advisable to register the partnership deed with the registrar.

Important Contents of Partnership Deed

contents of partnership deed

The usual provisions which should be contained in such documents are as follows:

Name of the Firm to Start

Name of the firm under which the business is to be conducted. It may be any name you choose.

Nature of Business

Nature of the business to be conducted by the partners. There are different types of businesses that include rendering services, making products, being a distributor of a brand, opening a retail shop, dealing with wholesale, importing, or exporting goods. Anything but legal.

Business Location

Location of the business where it is to be operated. If it’s a production concern, the better option is to be an industrial area but if it is a retail shop, go to the market where people come and buy and if, it is a service providing i.e., service at the client’s doorstep – it may be anywhere.

List of Partners

List of partners, their names, addresses, and other particulars. Who are the partners and what will they do. The best practice is to divide departments of businesses according to partners’ expertise. It would be wrong to assign human resources or retailing duty to a partner if he/she is educated with Marketing subjects.

Duration of Partnership

Duration of the partnership; whether it is a definite period of time or an indefinite period of time. It is mandatory to mention indeed. Sometimes the business may not go smoothly; this portion of the partnership deed can help to end the business in minutes or it may be extended or rewritten if in case they want to extend

Date Of Business Commencement

It is an important part of the deed. If the business is going to be legally listed in state law. The date of business starting could help in managing all responsibilities and other tasks of business including accounts, expenses, payable & receivable.

Total Capital Invested

The total capital of the firm and the share of each partner in the capital must be in writing to equally or partially distribute on closing.

Ratio of Profit

Usually, it is the same as the ratio of capital investment. There are different types of partners according to their job natures, capital investment, responsibilities, their practical share in the business. This is why the ratio of sharing profits and losses of each partner should be noted indeed.

Amount of Drawing

Do you think to take permission of withdrawing profit or capital? In partnership deed, it is mentioned in two terms

  1. What profit percentage owners can withdraw from the business per month or year
  2. What monthly amount anyone can take out on the monthly or yearly basis

Interest on Capital and Drawings

Not in sole proprietorship but in the partnership it may be discussed to charge a profit on the invested amount. The invested amount in business can be invested in some other business or deposited into a bank to get monthly/yearly profit. That’s why a few businesses or shareholders can demand interest depending upon the amount and expected ROI

Amount of Salary

At good businesses, there are fewer chances of withdrawing profit from a business. The best practice is to set a monthly fixed salary for each stakeholder. Salaries may depend on capabilities, capacities, roles, and roles.

Division of Work

Of course, investors can not manage every part of a business. There are multiple working in businesses from raw material purchases to finished products sales and recoveries. In a partnership contract, it is mentioned which partner will do what part of the business and what would be their specific roles. Interference in other works could be supplementary.

Amount of Profit

Few businesses do share a specific part of the profit to employees. It’s not their monthly salary; it’s add-on or extras to please workers to motivate them to perform duties well. An employee may be demotivated with time. Such incentives could be energizing. It so, it should be entitled indeed.

Head Office and Branches

Small or Large businesses can have more than one branch. If so, those details are noted down on contract papers including locations, branch roles, branch responsibilities, and not exceeding predefined monthly expenses.

Dealing Bank

Which bank to be selected for all business transactions like Royal Bank of Scotland, Bank of America or Santander. This may include signatory authority for banking purposes and the number of accounts to be opened in selected branches of a decided bank.

Additional Capital

How to further capital, if necessary is to be introduced. Either it is to be availed through bank loans or partners may be requested for further investments.

Audit of Accounts

There are many lop holes of the dishonest employees in every business. This reason gave birth to the auditing of accounts. There are more chances in businesses where more than two people are owners. This added part deals with provisions regarding the preparation audit and signing by the partners of annual accounts.

Rules of Admission and Withdrawal

Defining things before the problem is to be proactive. This provision means to set rules regarding retirements of adding a new partner, managing debt on the retirement of an existing partner, how capital will be returned to investors, and other long-term decisions.

Determination Of Good Will

This deals with how the value of goodwill is determined to each stakeholder. Each partner has a special role in a business that and accounts will be cleared of a retired or deceased partner.

Period of Accounts

Do not ignore accounting at any cost because, accountants prepare a Profit and Loss Statement, the Balance sheet at the end of the fiscal year in the manual accounting system. In all cases, it should be mentioned in contract papers to evaluate business worth after a specific time. With increased technology and advanced accounting software everything is prepared with a single entry.

Rights and Duties of Partners

Partner is different according to their rights, duties, investment and partnership contract. Each partner’s rights and duties should be clearly mentioned in the contract need to avoid disputes. In general, the sleeping partner has no role in business decisions but if decided earlier, they can take occasional parts in seasonal promoting activities or else.

Loan and Interest

Typically, the business may need a loan in the future after startup. Let say, a manufacturing concern may need to import advanced machinery or consumer product-based businesses may think to do mass level advertising to boost sales. In both cases or others, they may not have enough funds, plans may not be actionable. This clause helps such situations to decide whether to take a bank loan, if so; who will be a guarantor, or what properties should be pledged. These noted details take business decisions smoother.

Settlement of Accounts

The hardest thing – dissolution. It happens in most of the partnership businesses just because of extra interference or business losses. This content of deed, if decided; could help partners to dissolve everything smoothly and by Settlement of payable and receivable accounts, business assets distributions, or other liabilities and credits to be shifted on…

Arbitration

Disputes happen. Business is an ongoing process of making decisions, implementing strategies, sorting issues, designing new products and services. Partnership business is a combination of different minds and every mind has a different perspective, thoughts, and observation. In those disputes, what should be the solution?

Deficiency in Capital

How the deficiency in the capital will be covered at the insolvency of an arty partner.

Witness

Definitely, contracts are written and signed. There must be witnesses of agreement in partners. Minimum witnesses may be different according to your state law. Witness name, contact details, and authenticity of witness with their Social Security number, Country citizenship number (they are the real human, not fake) should be noted.

Ways of Dissolution

Bitter but fact-based disadvantages of the partnership include dissolution. In those cases, how to dissolve the partnership company, either it is to be done by state law in court or by mutual consent of all partners.

Others

Any other clause or clauses which may be found necessary at any time may be contained here by the mutual consent of all the partners.

lisa
Lisa C. Townes

Lisa is a passionate travelers. She spends 3 months every year visiting different places worldwide. She has visited almost every famous place in the world. She herself is an affiliate blogger

Filed Under: Commerce

10+ Sole Proprietorship Disadvantages – Why Choose Sole Tradership

Last Updated on January 12, 2020 By Lisa C. Townes Leave a Comment

Sole proprietorship advantages are not enough to take the decision of starting a business, another side of the coin is sole proprietorship disadvantages. If you are starting a business with small or huge finance, you may need to be very clear with facts. One wrong decision can disturb cash inflows.

There any unlimited cons of proprietorship business that includes personnel management, understanding business psychology, negligence to advertising campaigns, Lack of communication in supply chain management, Marketing, Purchasing, Financing, Accounting, Brand Management, Online activities and many more.

Sole Proprietorship Disadvantages
• Limited Capital
• Complete Liability
• Limited Skills
• Time Management
• Limited Growth
• Entire Loss
• Unable to handle everything
• Hard to move in Large
• Smaller Public Confidence
• High Chances of Fraud
• Personal Abilities
• Unable to Look After
Sole Proprietorship Advantages
• Easy Formation
• More Interest
• No Profit Sharing
• Everything is Secret
• Cost-effective Operations
• You are Ruler
• Easy Dissolution
• Socially Empowered
• Credit Facilities
• Flexible Operations
• Relationship in Person
• Sale & Transfer
• You are King

10+ Disadvantages of Sole Proprietorship

disadvantages of sole proprietorship

Lack of Capital

As financial resources of one man are generally limited there is always a deficiency of capital in this form organization.

The biggest Sole Proprietorship Disadvantage is that He cannot produce goods on large scale due to limited capital. Furthermore, he cannot enjoy the economy in any sector.

When there is limited capital it means limited profit.

Disadvantages of joint stock company are on another hand but this company does not face a capital shortage.

Unlimited Liability

A sole trader is liable for all the obligations of business to the full value of the assets that he possesses. This is a great drawback of this form of the business house. If his business becomes unsound at any time his private property is also liable to pay the business debts.

But, each shareholder in all types of Joint Stock Company has limited liabilities.

Lack of Skilled Persons

Two factors i.e. technical and administrative necessary for the smooth and successful running of the business. But the one man may not hire the services of qualified and experienced persons for an indefinite period of time due to his limited sources.

Therefore he cannot achieve the maximum benefit from its financial and capital sources.

Lack of Continued Existence

There is a lack of permanence in the life of sole proprietorship. His business may come down after his death if there are no experienced heirs to control his business.

The operating life of his business may adversely be affected in case of suffering from some physical or mental disease, this can cause business cycle from boom to depression.

But, advantages of Joint Stock Company is to possess continued existence in its life.

Limited Chances of Growth

It is not possible for one man to increase his business volume due to the following factors:

  • Unlimited Liabilities
  • Limited Life.
  • Lack of managerial and technical abilities.
  • Lack of capital.

Therefore his business remains limited and the business cannot earn handsome profit due to limited activities. But other forms of the business house are not faced with these hindrances.

Entire Loss

The heaviest from all Sole Proprietorship Disadvantages is Loss. As one man is the owner of the organizations, he has to pay all the expenditure, losses and obligations of the business himself. Another main disadvantage of the sole proprietor is that nobody will share with him in this regard.

If there is a heavy loss, his business may come. But in the case of partnership and joint stock company, entire loss is distributed among the number of persons; as it would be mentioned in contents of partnership deed.

Management Problems

I personally feel the core difference between sole proprietorship and partnership is that one man cannot perform all types of management and business activities effectively. Other can be managed and hired as well.

If the businessman is a good technician, he may not be a good administrator.

If he is a good accountant he may not be a good purchase officer.

So, one man cannot possess all types of abilities at one time, therefore, several problems may arise in the supervision and conduct of the business.

On the other hand partnership and company enjoy the combines abilities of several heads as well as they can monitor the duties of employee are performed well or not.

Unsuited for Large-scale Industry

This type of organization is quite unsuited for those industries where:

  • Large capital is required.
  • High production is needed.

Skilled managerial and technical abilities are to be employed. Therefore the large size of business may not be conducted by one man.

Lack of Public Confidence

Public shows less confidence in this type of business due to the following reasons.

  • There are no legal regulations to control the sole tradership
  • No rules for transfer of the ownership of a business.
  • No legal principle for winding up the business.
  • No compulsion for an audit of the accounts.

Chances of Fraud

Generally, goods are supplied on credit to retailers. But a proper record of these transactions is not maintained. Relevant vouchers are not prepared and documents are not kept for future references. This irregularity or negligence in the preparation of accounts and other record create the chances of fraud for dishonest and non-skilled workers. Thus sole trader cannot know the actual result of his performance and of debts.

Psychological Complexity

As the Joint Stock Company and partnership enjoy the economy in the large-scale production, distribution, and management, it is possible for them to earn a large profit. But in a sole proprietorship, one man has to face certain troubles in business activities. He works hard without any vacation but earns minor profit comparatively. He thus feels much strain on his health and suffers from inferiority complex.

Lack of Inspection

As there are no rules and no boss to supervise one-man business, therefore, sometimes he is found in illegal activities regarding money i.e. smuggling, black marketing, boarding and speculating. The absence of fear of inspection brings unnecessary drawing wasting, expenditure and excessive withdrawal of profit which leave behind the adverse result on business.

Due to the foregoing reasons, one man control is not considered best. This type of business is not liked and preferred to other forms of business organization.

lisa
Lisa C. Townes

Lisa is a passionate travelers. She spends 3 months every year visiting different places worldwide. She has visited almost every famous place in the world. She herself is an affiliate blogger

Filed Under: Commerce

14 Best Sole Proprietorship Advantages – All Time Beneficial

Last Updated on January 12, 2020 By Lisa C. Townes Leave a Comment

Sole Proprietorship is starting your own business, it may be a shop, freelancing office, any service you provide, usually, these are small scales businesses. Joint Stock Company, Partnership, Sole Proprietorship, Co-Ownership are various types of business.

In this reading, we shall try to empower sole traders by highlighting top Sole Proprietorship Advantages. It entirely doesn’t mean sole proprietorship disadvantages should be neglected. They are too fact-based.

Sole Proprietorship Advantages
• Form Easily
• High Personal Interest
• Grap Full Profit
• Business Secrecy
• Low Cost operations
• Complete Control
• Dissolve Easily
• Social Benefits
• More Credit
• Flexiblities
• Direcct Interactions
• Easily Transfer Ownership
• Indepence
Sole Proprietorship Disadvantages
• Lack of Capital
• Unlimited Liability
• Lack of Skills
• Continued Existinace Problems
• Fewer Growth Chances
• Complete Loss
• Management Issues
• Unable to move in Large Scale
• Limited Public Confidence
• More Frauds
• Psychological Complexes
• Inspection Prblems

Advantages of Sole Proprietorship

sole proprietorship advantages

Easy Formation

An individual enterprise is easy to form and simple to run. No legal formalities, like registration, are required to set it up, and no reports are submitted to the govt. about the function of the business. But there is a complicated and long process for the formation joint of stock company.

Personal Interest

As there is a personal element in this class of business organization, businessman devotes his full time and energy. He tries to know the habits, fashions, and tastes of his customers and he changes his policy according to circumstances. Thus he may easily establish his goodwill in the market due to personal care. But partners and shareholders have minor personal interest.

Entire Profit

There is no other form of business in the world except this where one man enjoys 100% Profit of business. The key Difference Between Sole Proprietorship and Partnership and joint stock company, the profit is distributed among the number of persons.

Secrecy

In my view, one from the biggest Sole Proprietorship Advantage is secrecy is the important factor which may be maintained by the sole proprietor. There are three types of secrecy i.e. trade agreement, the technique of production and profit.

Low Cost of Starting and Operation

The sole proprietor has to incur minor preliminary expenses for the commencement of this type of business. There are no legal charges, registration expenses, attorney and advisory fee. As generally the business is managed by one person, he has not to pay operational expenses. But Joint Stock Company is a costly organization.

Entire Control

The most common reason and all-time favorite advantage of sole proprietorship are that a sole trader has entire control over all his assets and other activities. When his business increases in size, some authority is delegated to paid person, but ultimately the control and supervision remain in the hands of one person. He can do whatever he likes. Other persons cannot interfere in his mater. But this is not possible in another form of business organization.

Easy Dissolution

This type of business may easily be dissolved at any time. There is no complicated formality for the dissolution of a sole proprietorship, as in the case of Joint Stock Company where long legal procedures are required for the winding up of its business.

Social Benefits

This form of business may be commenced with small capital and minor managerial abilities. So it provides the opportunity for livelihood to jobless persons. On the other hand, sole trader renders valuable services for the public. He provides daily necessities of life near to their home.

Credit Facilities

Under the sole tradership the liability of the owners in unlimited. It means that his private assets are also liable to pay the business obligations. This factor enhances the credit facilities from the internal and external sources.

Flexibility

As mostly the activities are supervised and controlled by the sole proprietor himself, therefore, it tries to achieve the economy in the various fields & phases of business cycle. Thus his sources do not waste in an unproductive sector.

Direct Relationship

Sole trader possesses a socially connected life and this is an important factor for the expansion of the business. On one side he manages staff, assign duties and maintains a direct relationship with the workers to achieve the best results of his venture.

On the other side, he develops cordial relations with customers and the general public in order to create the demand for his product. He thus establishes his sound reputation inside and outside the business.

Simplicity in Transferability

The kind of business may easily be transferred to another person. No legal permission is required to close down or suspend. At any time sole trader may recommence, transfer or disconnect without any restriction. But there is a long complicated procedure to transfer the business of Joint Stock Company.

Independent Sources of Livelihood

Sole proprietorship is an independent form of organization for the businessman in the world. There is no interference from any quarter. He is the supreme authority who enjoys self-determination, the excitement of social relation and psychological satisfaction.

Due to the above-mentioned reasons &  sole proprietorship advantages, the system of single ownership is liked and preferred to other forms of business houses and therefore, this type is found till today in spite of being an old system.

One man control is to be regarded best in the world if the size of the sole proprietor’s business remains restricted to a certain extent and does not tend to increase in near or far future.

lisa
Lisa C. Townes

Lisa is a passionate travelers. She spends 3 months every year visiting different places worldwide. She has visited almost every famous place in the world. She herself is an affiliate blogger

Filed Under: Commerce

What are the 7 C’s of Effective Communication – Examples Explained

Last Updated on June 7, 2021 By Lisa C. Townes 5 Comments

The ability to communicate effectively with others is considered a prized quality of successful people. So in order to compose an effective oral speech or written message, you just need to understand psychology in Business, your clients, your staff, observe the market to take effective decisions & let your message reach accurately the audience. The 7 C’s of effective communication combined with principles would help you to attain your goal, follow certain principles.

Communication skills in business are important that plays in professional life from understanding your staff to make a perfect selling approach. Different studies showed that it is an important salesman skill that helps to generate more leads.

They are called 7 C’s because each of these principles begins with the alphabet “C”.

The 7 C’s of Communication

7 C's of Communication
• Clarity
• Correctness
• Conciseness
• Courtesy
• Concreteness
• Consideration
• Completeness
Short Explanations
• Be clearer in Delivering
• Write Perefectly, Mistakes Free
• Be Short, but Complete
• Be Soft & Gentle
• Be Specific
• Focus on Receiver
• Complete the Message

Clarity

Clarity is the soul of a business message. It means the accurate transfer of ideas from the sender’s head to the receiver’s.  Every message should be conveyed in a clear manner. Clarity comes through clear thinking. A good message shows the idea directly and clearly.

A writer should not start the message unless he knows how (use of language) and what (central idea) he wants to say. A message written in the simple and ordinary language is always natural and appreciable.

To achieve clarity, keep in mind the following points:

  • Use common and simple language.
  • Construct effective sentences and short paragraphs.
  • Use concrete words instead of abstract words.
  • Avoid unnecessary information.

Correctness

Language experts say that writing is art but difficult. There is no shortcut to being a good writer. It is learned through consistent practice and constant struggle. The message being communicated must be correct. Correctness refers to correct grammar, punctuation, and spelling. Though mistakes are never intentional yet they spoil the image.

To achieve correctness, follow these guidelines:

  • Check the accuracy of facts and figures.
  • Check mistakes in punctuation, grammar, and capitalization.
  • Check misspelled words.
  • Use the right level of language.

Conciseness

The beauty of diction lies in its conciseness. Conciseness means brief and complete. Be as brief as possible. But it must not be so brief as to be discourteous.

Conciseness is a pre-requisite to effective business messages. A concise message saves time and expense for both sender and receiver.

To achieve conciseness, observe the following suggestions:

  • Remove the wordy expressions.
  • Include only relevant material.
  • Avoid unnecessary repetition.

Courtesy

Courtesy is the most important quality of the business message. “Everyone gains where courtesy reigns” is an old but wise saying. Courtesy means politeness.  It is an attitude that shows respect for others. It helps in building goodwill.

It is not enough to use polite expressions like” thank you”, ”kindly”, “we appreciate”, “please” etc but the whole letter must have a courteous tone.

To achieve courtesy, keep in mind the following points:

  • Be sincere.
  • Use expressions that show respect.
  • Be thoughtful and appreciative of the receiver’s point of view.
  • Avoid humor.
  • Avoid discriminatory language i.e., race, color, gender, creed etc.

Concreteness

Communicating concretely means being specific, meaningful and clear. Vague and general messages result in no response. It helps the receiver to understand the exact idea. Concrete use of available facts and figures adds to the authenticity of the message.

To achieve concreteness, consider the following ways:

  • Use clear and image building words.
  • Use specific facts and figures.
  • Use active voice than passive voice.

Consideration

Consideration is to put you in the place of the receiver. It means preparing every message with the message receiver in mind. This mode of consideration is called “you attitude”.

When you are truly considerate, you try to show sincere regard for his interests and benefits.  To be considerate, the following points should be kept in mind:

See your material from your reader’s point of view.

  • Focus on “you” instead of” we” e.g.,
  • We are delighted to inform _ _ _ _ ­­
  • You will be glad to know _ _ _ _
  • Be sure about the benefits of the receiver.
  • Consider the needs and problems of the receiver.

Use positive and optimistic

Completeness

A business message should be complete to bring the desired result. A complete message contains all the facts required by the receiver. The receiver’s reaction to an incomplete message is often unfavorable. An incomplete message shows negligence and carelessness of the writer.

For completeness follow these guidelines:

  • Remember the five W’s (what, when, where, why, who) and how.
  • Provide all the necessary information.
  • Answer all the questions asked.
  • Include additional information, if desired.

It can be said that awareness of these 7 C’s of effective communication makes you a good communicator.

lisa
Lisa C. Townes

Lisa is a passionate travelers. She spends 3 months every year visiting different places worldwide. She has visited almost every famous place in the world. She herself is an affiliate blogger

Filed Under: Commerce

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