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Joint Ventures and Partnership Business Enterprises (Business Growth Series 6)



An entrepreneur can also achieve business growth through joint ventures. For a joint venture to be an effective strategy for business expansion, you need to carefully appraise the situation and the potential(s). A joint venture can be taken to mean a separate entity that involves a partnership between two or more active participants. A Partnership ... Continue Reading

An entrepreneur can also achieve business growth through joint ventures. For a joint venture to be an effective strategy for business expansion, you need to carefully appraise the situation and the potential(s).

A joint venture can be taken to mean a separate entity that involves a partnership between two or more active participants. A Partnership enterprise is an example of a joint venture.

Factors that Result in Joint Ventures:

  1. The accurate assessment of the parties involved in order to best manage the new entity in the light of ensuing relationships. The joint venture will be more effective if the managers can work well together.

  2. The degree off symmetry between partners. The symmetry includes both objectives and resource capabilities.

  3. The agreement of the partners in terms of objective matters. For example, a partner may feel that he or she is bringing in more to the table or a situation where one partner wants profits and the other desires product outlets. These scenarios could result in problems.

Partnership Business Enterprises

A partnership is conventionally agreed to be an enterprise established, financed, owned, managed and controlled by two to twenty people.

The minimum of two and maximum of twenty people (depending on the law of the society involved), are referred to as “partners” and hence the name “partnership”.

In order to prevent and avoid conflicts as well as to ensure a smooth running of the business, a written agreement, referred to as “partnership deed”, is drafted out.

The agreement formalizes the relationship between partners and makes provisions for other related business issues such as:

  • The minimum or maximum amount of capital to be contributed by each partner.

  • The process of modalities of profit sharing.

  • The process of withdrawal of money for payment of salaries, buying of raw materials, settlement of bills etc.

  • The procedure of admission of new partners and the withdrawal of existing ones.

  • What is to be done when any of the partners dies?

  • How to resolve conflicts or disputes among partners.

  • As well as many more other important information that will aid in the smooth running of the business.

Forms of Partnership

Though, there are various forms of partnership enterprises, they can be broadly categorized into two:

  • General, and

  • Limited.

General Partnership Enterprises:

In general partnership enterprises, all the partners actively participate in the day-to-day running of the business and each partner is free to make any transaction on behalf of the enterprises.

Not just that! Also, in general partnership, the liability of the partners is an unlimited one.

Limited Partnership Enterprises:

In the case of the limited partnership enterprise, not all the partners participate in the daily operations of the business and all the partners are not free to act on the behalf of the enterprise.

Participation in the day-to-day management of the business or company is limited to some partners; at least one of them as specified by law. The liabilities of the limited partners are also limited to their investment in the enterprise.

The partnership form of the business is widely practiced in the services industry and by professionals such as quantity surveyors, accountants, lawyers etc.

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