Give the meaning of 'Implied Authority' and 'Mutual Agency' as characteristics of a partnership form of business organisation. State any two characteristics of partnership which overcome the inherent limitations of sole proprietorship form of business organisation.

Question

Accepted Answer

Implied Authority means that any partner can act on behalf of the firm in the ordinary course of business without the express consent of other partners. It flows from the very nature of the partnership business. Mutual Agency means that every partner is both an agent and a principal — each partner can bind the firm and other partners by his acts done in the ordinary course of business, and each partner is also bound by the acts of other partners done within the scope of authority.

Two characteristics of partnership which overcome the inherent limitations of sole proprietorship are:

1. **Unlimited Liability** — In sole proprietorship, the owner alone bears all losses, but in partnership, the burden of losses is shared among all partners, reducing individual risk.

2. **Mutual Agency and Combined Managerial Ability** — Since each partner can contribute skills and decisions, the limitation of one person's limited managerial ability is overcome through collective expertise.