(a) State five features of a partnership business. (b) Explain five reasons why governments participate in business.

Answer Details

(a) Five features of a partnership business

1. Number of partners: It is owned by between 2 and 20 persons (2 to 10 in the case of banking) who agree to carry on business together for profit.
2. Unlimited liability: The general partners have unlimited liability, so their private property can be used to settle the debts of the firm.
3. Partnership deed/agreement: The business is usually formed and governed by a partnership deed which states the rights, duties and profit-sharing ratio of the partners.
4. Sharing of profits and losses: Profits and losses are shared among the partners according to the agreed ratio or, where none exists, equally.
5. No separate legal entity: The firm has no legal personality distinct from its owners, so the partners are jointly and severally liable for its actions.

(Other acceptable features: it can be dissolved by death, insanity or bankruptcy of a partner; it is not required to publish its accounts; management is shared among the partners.)

(b) Five reasons why governments participate in business

1. To provide essential services: Government engages in business to supply essential goods and services such as water, electricity, and public transport which private investors may neglect because of low profit.
2. To generate revenue: Profits and dividends from government-owned enterprises provide additional income to the state for financing development projects.
3. To create employment: By setting up industries and corporations, government creates job opportunities and reduces unemployment in the country.
4. To provide capital-intensive projects: Some projects such as steel mills, refineries and railways require huge capital that private individuals cannot easily raise, so the government undertakes them.
5. To prevent exploitation and control monopoly: Government participates in order to check the exploitation of consumers by private monopolies and to keep the prices of essential goods within reach of the ordinary citizen.

(Other valid reasons: to protect strategic industries and ensure national security; to correct regional imbalance by siting industries in less developed areas; to control key sectors of the economy.)