Owning a business comes with strains of many responsibilities, a lot of people delve into a business partnership with less information on the intricacies of what it entails and what is the legal structure with that kind of setup and end up running a loss or making the wrong investment choice. Therefore, there is a need to understand the difference between a partnership and co-ownership structure of business entities. Partnership and co-ownership are just two different segments in business that need to be properly understood by people who wish to go into a business that contains such terms. If you are going into this type of agreement, it’s important to know the difference between the two, there are quite a several differences between a partnership and co-ownership.
Co-ownership
This involves joint ownership of some assets or properties but does not create a partnership; there is a cap limit to the number of people involve whilst in Partnership, on the other hand, the partners are the co-owners of the business and run it together. There is no ceiling on the maximum limit of co-owners in this type of business.
This article looks to explore more on this topic and lay the clear difference between a partnership and co-ownership.
Partnership
A partnership is a single business where two or more people share ownership. Each member contributes to all aspects of the business, including money, property, labor, or skill. In return, each partner shares in the profits and losses of the business.
A partnership is formed through a contract, the partners involve cannot transfer or share their shares to another person without the prior permission of the other parties involved. There is a limit cap to the number of people who can engage in partnership; mostly it depends on the industry the partnership is been formed, a partner does have the right to demand that, the property that is jointly owned be share among partners but a partner does have the right to share his part of the profit in the partnership. ” Two or more individuals may form a partnership by making a written or oral agreement that they will jointly assume full responsibility for the conduct of a business” according to Dr.J.A.Shubin. In partnership, it can be dissolved based on the death or retirement of any member.
A partnership should bear the following:-
Keys points to look out for in partnership:
1. Contract
A Partnership is a result of an agreement between the partners involved.
2. Number of Partners
In partnership, there is an allowable number not exceeding the maximum limit, there can be a limit number of 10 people in a firm or 20 people in any type of business.
The objective of the partnership is to carry on lawful business and earn profits that are equally shared between the partners.
A. Sharing profit and loss
The purpose of going into a partnership is to earn profit but space must be made to incur some losses, in partnership, there is sharing of profit and loss among partners depending on the sharing ratio of mutual contract that was entered.
B. Unlimited Liability
In Partnership, partners share joint and unlimited liabilities or in better terms, they are liable jointly and severally for all debts and their obligations of the firm or business to an unlimited extent.
C. Interest transfer
In partnership, a partner cannot transfer his/her right to any party without the consent of all interested partners in the agreement. The terms and agreement do not allow it.
Co-ownership
Co-ownership is a term to describe a business when two or more individuals share ownership in or take legal ownership of an entity or business. The arrangement of ownership between two people or more may or may not have an intention of making a profit or doing any major business activities.
To some extent, the purpose of co-ownership is to enjoy the benefits of assets, funds, and properties involved in the agreement which are jointly owned by the parties. Co-ownership can arise by operation of law, in the circumstance of the death of a father, the son or daughter can become co-owners of the entity or business. The rights of each owner are clearly defined with the terms of the contract or the written agreement that binds the parties involved and it may include tax, revenue, and financial obligations. There is no limit to the number of people that can co-own an entity also unlike a partnership, co-ownership cannot be dissolved in the likely event of death or retirement of a member in co-ownership.
Keys points to look out for in co-ownership:
1. Contract
In co-ownership, it is backed by law. It may arise from an agreement between the parties involved.
2. Number of Partners
With co-ownership, there is no limit cap to the number of people allowed to join.
Co-ownership is not entirely meant for business purposes only, it may or may not be for profit-making.
1. Sharing profit and loss
Unlike in partnership, where the profit and loss are shared between members, in co-ownership, there is no sharing of profit or loss because it does not involve a profit-making business.
2. Unlimited Liability
No unlimited liability in co-ownership.
3. Interest transfer
In co-ownership, a co-owner has the right to transfer his/her interest to another party without the consent of the other owner with whom he /she jointly share the interest.
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