Observation

The question was avoided by almost of the candidates. The performance of those who attempted the question was very poor. Some wrote the problems associated to business generally without recourse to the question which has to do with problem associated to partnership business. The expected responses to the question include:

5(a)Conditions under which a partnership may be formed

i. It could be formed for activities which require knowledge and skills of members such as doctors, lawyers and accountants.

ii. It could be formed for ventures that do not require very large amounts of capital.

iii. The formation of partnership must involve members who have contractual capacity.

iv. The partnership must be registered under the business name.

v. There must be a Partnership Agreement/ Deed.

vi. It is suitable where ownership and control is not extended outside the family and friends.

5(b) Problems partners may encounter

i. Disagreement during decision making could create problems among the partners.

ii. The partners are liable to the debts of the business to the extent of their personal assets in case of bankruptcy.

iii. The death or insanity of a member would affect the business.

iv. There could be lack of expansion as a result of limited managerial skills of existing members.

v. Decision making could be slow since every partner would have to be consulted before reaching an agreement.

vi. The inability of the partnership to raise sufficient funds from the public could affect the capital structure of the business.

vii. The withdrawal of one partner could lead to the end of the partnership.