A Partnership is an alliance between 2 or more persons to form a business that would be run by all of them. Partnerships are formed for various reasons. For example, if there was a market for yams in Indonesia, then a yam farmer, lawyer, exporter, and a shipper could form a partnership to facilitate the exportation of yams to that country. It would save on the overall costs of getting the goods from the ground to its destination. Profits from the sales of the yams would be shared up amongst all members of the partnership. So, how does that work? Let us break it down a bit here.
The farmer would be responsible for planting and reaping the yams. In the meantime, the lawyer would look about the legal aspect of the business, drafting the Articles of Association and Memorandum of Association for the partnership and getting the company incorporated. The lawyer would also be in charge of drafting the agreement between their company and the company or government of the country where the goods will be shipped. Once set up and the yams are ready, the exporter would arrange for the yams to be picked up and boxed at a warehouse or factory. The shipper’s job would then be to ship the produce off to their destination. When payment is received based on the terms of the contract, all members of the partnership get their cut.
If we look at the issue objectively, if each person involved in the whole chain of events was from a different company, you could just imagine the costs that would be associated with the venture! So partnerships do make sense as they serve the ultimate good of all involved, in both time and money.
