Commerce

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

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.

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 include personnel management, understanding business psychology, negligence in advertising campaigns, Lack of communication in supply chain management, Marketing, Purchasing, Financing, Accounting, Brand Management, Online activities, and many more.

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

10+ Disadvantages of Sole Proprietorship

Lack of Capital

As the financial resources of one man are generally limited there is always a deficiency of capital in this form of 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 the 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 the business to the full value of the assets that he possesses. This is a great drawback of this form of 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 Companies 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 a business cycle from boom to depression.

But, the advantage of a 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 of all Sole Proprietorship Disadvantages is Loss. As one man is the owner of the organization, he has to pay all the expenditures, 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 a partnership and joint stock company, the entire loss is distributed among the number of persons; as would be mentioned in the contents of the 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. Others 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 purchasing 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 companies enjoy the combined abilities of several heads as well as they can monitor the duties of employees 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 large size of business may not be conducted by one man.

Lack of Public Confidence

The 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 the 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 reference. This irregularity or negligence in the preparation of accounts and other record create the chances of fraud for dishonest and non-skilled workers. Thus the 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 a minor profit comparatively. He thus feels much strain on his health and suffers from an inferiority complex.

Lack of Inspection

As there are no rules and no boss to supervise a 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 is preferred to other forms of business organization.

A sole Proprietorship is starting your own business, it may be a shop, freelancing office, or any service you provide, usually, these are small scales businesses. Joint Stock Companies, Partnership, Sole Proprietorships, and 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	Sole Proprietorship Disadvantages
Form Easily	Lack of Capital
High Personal Interest	Unlimited Liability
Grap Full Profit	Lack of Skills
Business Secrecy	Continued Existence Problems
Low-Cost operations	Fewer Growth Chances
Complete Control	Complete Loss
Dissolve Easily	Management Issues
Social Benefits	Unable to move in Large Scale
More Credit	Limited Public Confidence
Flexibilities	More Frauds
Direct Interactions	Psychological Complexes
Easily Transfer Ownership	Inspection Problems
Independence

Advantages of Sole Proprietorship

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 the stock company.

Personal Interest

As there is a personal element in this class of business organization, the 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 interests.

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 a Sole Proprietorship and Partnership and a joint stock company, the profit is distributed among a number of persons.

Secrecy

In my view, one of the biggest Sole Proprietorship Advantages is secrecy is the important factor that 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 fees. As generally the business is managed by one person, he has not had to pay operational expenses. But the Joint Stock Company is a costly organization.

Entire Control

The most common reason and all-time favorite advantage of a 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 a 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 to the public. He provides the daily necessities of life near their home.

Credit Facilities

Under the sole tradership, the liability of the owners is unlimited. It means that his private assets are also liable to pay the business obligations. This factor enhances the credit facilities from 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 the 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, assigns duties, and maintains a direct relationship with the workers to achieve the best results for his venture.

On the other side, he develops cordial relations with customers and the general public in order to create 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 a Joint Stock Company.

Independent Sources of Livelihood

A sole proprietorship is an independent form of organization for businessmen around the world. There is no interference from any quarter. He is the supreme authority who enjoys self-determination, the excitement of social relations, 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 today in spite of being an old system.

One man’s 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 the near or far future.

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, and 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, and follow certain principles.

Communication skills in business are important that plays in professional life from understanding your staff to making 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	Short Explanations
Clarity	Be clearer in Delivering
Correctness	Write Perfectly, Mistakes Free
Conciseness	Be Short, but Complete
Courtesy	Be Soft & Gentle
Concreteness	Be Specific
Consideration	Focus on Receiver
Completeness	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 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 prerequisite to effective business messages. A concise message saves time and expense for both sender and the 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. The 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 the 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.