Partnerships

4. PARTNERSHIPS:

Partnerships are governed by Partnerships Proclamation of 1978, common law as well as private agreement (the partnership agreement).
A partnership is relatively simple and flexible form of business organisation. The most important consideration of a partnership is the partnership agreement.

Establishment procedure: It is relatively easy to establish a partnership and a little cheaper than to start a company. The partners need to have register and acquire what is known as a deed of partnership.
Finance: Finance may be easier to raise than in the case of a sole trader because it will not be dependent on a single person’s credit.
Continuity of existence: the partnership has no existence in law separate from the partners. However, the partnership’s is not usually tied down to the involvement of any particular person.
Limitation of liability: each partner is personally liable, without limit, for the debts of the firm.
Control of the organisation: the partners own and operate the business and make all the decisions. However, decisions must t be made jointly by the partners and some decisions require unanimity.
Formalities: Administration is relatively simple and costs are low. Similar to a sole tradership to a certain extent.
Admitting new investors: there is an absolute limit on the size of the partnership. The Companies Act as well as the 1957 Proclamation specifically mention that a partnership in Lesotho shall not have more than 20 partners.
Tax implications: Partnerships do not pay tax, partners do. This means that partnership losses can be offset against the partner’s other income. Partnerships are often used for income-splitting purposes.
Cessation of business: It can be simple or complicated to end a partnership. Dissolution of a partnership can be achieved voluntarily or by court order.