BUSINESS ASSOCIATION

BUSINESS ASSOCIATION

 Partnership exists when two or more persons join together to run a business. The associations may operate under different degrees of formality, ranging from informal oral agreements to formal contracts and legalized in the area in which the company conduct its operations. The main advantage of the partnership is its low cost and ease of training. The disadvantages are similar to those associated with the individual: 1) unlimited liability, 2) impermanence of the organization, 3) difficulty of transferring ownership and 4) difficulty in obtaining large sums of capital.

   The tax treatment of a partnership against the corporation may be an advantage or a disadvantage, depending on each situation. Regarding liability, the partners must risk all his personal assets, even those not invested in the business, because under partnership law, partners are liable for the debts of the business. This means that if either partner is unable to satisfy a pro rata claim against the association after it has gone bankrupt, the other partner should take care of unsatisfied claims, making use of their personal assets if necessary .

      The first three disadvantages (unlimited liability, unstable dificultas organization and transfer of ownership) are combined to form the fourth, the difficulty that associations have to attract substantial amounts of capital. This is not a particular problem of a slow-growing business, but if the company's products really are successful and the company needs to obtain large amounts of capital in order to capitalize on their opportunities, their difficulty in attracting capital becomes a big problem .

   Therefore, companies like Hewlett-Packard and Apple Computer usually begin life as individuals or associations, but at some point they are forced to become corporations