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Formation of a partnership.

Answer Text:
Formation of a partnership.
- People who want to form a partnership must come together and agree on how the proposed business will be run to avoid future misunderstanding.
- The agreement can either be oral (by use of mouth) or written down.
- A written agreement is called a partnership deed.
- The contents of the partnership deed vary from one partnership to another depending on the nature of the business, but generally it contains:
(a) Name, location and address of the business.
(b) Name, address and occupation of the partners.
(c) The purpose of the business.
(d) Capital to be contributed by cash partner.
(e) Rate of interest on capital.
(f) Drawings by partners and rate of interest on drawings.
(g) Salaries and commissions to partners.
(h) Rate of interests on loans from partners to the business.
(i) Procedures of dissolving the partnership.
(j) Profit and loss sharing ratio.
(k) How to admit a new partner.
(l) What to do when a partner retires, dies or is expelled.
(m) The rights to inspect books of accounts.
(n) Who has the authority to act on behalf of other partners.