Forming a Partnership Role of Agency Business Essay

  • Length: 6 pages
  • Sources: 8
  • Subject: Business
  • Type: Essay
  • Paper: #54827784
  • Related Topic: Liability, Taxation, Debt

Excerpt from Essay :

Forming a Partnership

Role of Agency Business Association

Agency refers to the capacity or ability of the agent to act on behalf of a business association or partnership. Agencies perform or execute numerous roles in relation to authority from the business association. The first notable role of the agency is ensuring effective and efficient contractual situations concerning the business association. Agency ensures that the contracts of the business associations are in line with the laws governing business organizations. Agency also promotes the interests of the business associations by marketing products and services of the entity. This indicates that agencies perform the role of marketing or promoting business activities thus conducting transactions on behalf of the business entity. Agency also identifies the problems facing the entity and act towards executing the solution (Mann & Roberts, 2008).

The role of agency in business association focuses on contractual, noncontractual, and quasi-contractual with respect to different individuals or business potential partners. Thus, agency emphasizes on the legal aspect of the business association. The dealing of the agency on the legal aspects of the business association must be under the authority of the business entity. Agency has the capacity to negotiate with the third party on behalf of the employing entity thus bring the two parties into an agreement. The specification of duties of an agency indicates that agents must not act on behalf of the employing entity without the official authority from the employers. The agency identifies the legal difference between employers and the third party and then act towards bringing the two parties together. The contractual situation between the two parties must follow the business principles and policies. This is an indication that agency must operate within the business guidelines and principles to execute their roles in business associations (Mann & Roberts, 2009).


Partnership refers to the relationship between two more individuals who come together to conduct business or trade. Partnership would also mean unincorporated business organization where multiple individuals (general partners) agree to manage the business and share equal liability to the debts. The partnership scenario, some individuals might decide to invest (limited partners) but do not directly engage in the management of the business thus liable to equal extent of their contribution (Piotrowski, 2008).

Advantages of Partnerships (Piotrowski, 2008)

Advantages of partnerships with respect to business associations include

Partnerships are flexible and simple thus, are relatively easy to establish. Partnerships do not require numerous documentation to establish thus cheaper than other business associations.

Partnerships are cost-effective in their operations in that each partner specializes in specific areas of the organization. Each partner contributes effectively and efficiently since each engages in activities well suited to their qualifications.

Partnerships experience higher contribution capacity concerning funds. With more than one business owner, partnerships have the advantage of contributing large amount of money because of increase in the borrowing capacity of the partners. Partners also have the capacity to contribute more funds because of the quantity in comparison to sole proprietorship.

Partnerships have the capacity to enhance its space by inclusion of prospective employees. Prospective employees might decide to join the partnership in the presence of incentives to the business association.

Partnerships promote moral support and creativity in relation to brainstorming. This enhances the contribution of ideas and principles to the development of the business association.

Partnerships provide room for partners to share profits, decisions, and liabilities. Partners share the responsibility of managing the business entity thus effective and efficient evaluation of ideas.

Disadvantages of Partnerships (Kuratko, 2009)

Partnerships also experience some disadvantages despite the overwhelming advantages. Some of the disadvantages of partnerships include

Partnerships are in danger of business disagreements in relation to the unique ideas of the partners. Since partnership is an association of different individuals with unique business ideas, disagreements between members would be prevalent in execution of roles and duties.

In partnerships, business partners are individually and jointly liable for actions of other business partners. This indicates that mistake by one partner, transfers to other partners within the business decision.

Profits by the partnership are shared equally among the business partners without regards to individual contributions of the members. The act of sharing profits reduces the amount of dividend to individual partners.

Partnerships might have the clause of limited to life. This indicates that the business association might end with the withdrawal or death of one partner. This would result into discontinuity of the business association.

Partnerships limit the freedom of partners in execution of their roles. This represents hindrance to the freedom of partners since each partner must consult with other owners in the process of decision-making.

There are limitations influencing the approach of partnerships towards large business entities. This disadvantage limits the maximization of profits and revenues in relation to the business association (limitation to business growth and development).

Limited Liability Companies

Limited Liability Company refers to corporate structure in which members of the company are not personally liable to the debts and liabilities of the business entity. Limited Liability Company incorporates the characteristics of partnerships and corporation. There is no limitation of the number of members of the limited liability company (Cartano, 2008).

Advantages of Limited Liability Company (Cartano, 2008)

Advantages of Limited Liability Company includes

Limited Liability: Members of the Limited Liability Company enjoy protection against liability of a corporation. This indicates that members of the Limited Liability Company cannot be personally liable to the debts of the company with exception to signing of the personal guarantee.

Flexibility in profit distribution: Unlike the partnerships where partners share the profits equally, members of the Limited Liability Company enjoy profits in relation to their contributions and efforts.

Limited Liability Company requires no business minutes or resolutions in the process of operation thus easier to manage.

Profits, expenses, and taxes in relation to the business association flow from the company to individual members. This enables members of the Limited Liability Company to avoid double taxation in conducting the transactions on behalf of other business members.

Separate Legal Identity: Limited Liability Company experiences legal existence separate from the management and other members of the entity (shareholders).

Disadvantages of Limited Liability Companies (Gitman, 2009)

Despite the overwhelming advantages of Limited Liability Companies, there are disadvantages in operating this type of business association. Some of the disadvantages of Limited Liability Companies include

Limited Life: Limited Liability Companies have limited life existence in relation to the death of a member or financial crisis (bankruptcy). This indicates that Limited Liability Company experience discontinuity of the business transactions when one member dies or the company is in a financial crisis.

Going Public: there is limitation to the process of taking the company to public status or issuing of employees' shares in the future.

Complexity: The documentation or paperwork for establishment of the Limited Liability Company is tiresome in comparison to partnerships and other business associations. This makes it difficult to manage the business entity.

There is also limitation of the formation of Limited Liability Companies to doctors and lawyers within the economy.

Members do not have to consult other business members in making decision in relation to their duties thus essence of inefficiency in ideas.


Corporation refers to the business organization under the jurisdiction of the state enjoying separate legal entity or identity from its owners. The organization (corporation) experiences limited liabilities to its members and easily transferable shares (Meiners, Ringleb, & Edwards, 2012).

Advantages of Corporations (Meiners, Ringleb, & Edwards, 2012)

Some of the advantages of corporations include

Protection of personal assets: Corporations allow its members not to be personally or individually liable for the debts of the business association or organization.

Corporations enjoy larger capacity in the contribution of capital to facilitate the operations of the business. This might be in form of issuing of shares to the public at specific prices. This also illustrates the ease in sales and transfer of shares of the organization.

Continuity: Unlike other business associations, death of a member cannot terminate the existence of corporation.

Attraction of more investors: Corporations have the capacity to attract potential investors because of the structure and mobility of its shares within the market or the economy.

There is distinction in the process of paying tax to the state. This is because corporation exists as a separate legal identity from its owners.

There is much flexibility in dealing with debts in relation to corporations.

Disadvantages of Corporations (Pride, 2012)

Some of the disadvantages of Corporations include

Complexity in organization and regulation: in the process of forming a corporation (incorporation), there is much documentation process making it complex to create the organization.

Double taxation: since corporation exists as a separate identity, shareholders might also pay tax on their dividends to supplement taxation on the revenue of the organization.

The essence of limited liabilities concerning the members of the corporation might drive away potential investors thus limiting the growth and development of the business association.

Centralized Management: this type of management limits the contribution of other members (minor owners) to the development of…

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