Disadvantages Of Partnership

1241 Words5 Pages
PARTNERSHIP Definition This is a relationship that exists between two or more persons jointly carrying out a business with the aim of making a profit. A partnership can be temporary or permanent. A temporary partnership is formed for a specific period or purpose and when that purpose is fulfilled it’s automatically dissolved. A permanent partnership can continue indefinitely. TYPES OF PARTNERSHIP (i) General partnership This is also known as an ordinary partnership or an unlimited liability partnership. It is the most common form. Here partners have unlimited liability partnership. Therefore, if the business is not able to pay all its debts, each of the partners will…show more content…
Disadvantages of partnership 1. Unlimited liability In case of insolvency, partner private property is attached to meet the firm’s liabilities. 2. Difficulty in making decision Authority is divided and decision may be difficult to reach. Delays are occasional as all partners have to be consulted which may lead to lost opportunity. 3. Lack of continuity Continuity is uncertain as departure of a member leads to dissolution. 4. Sharing of profits Returns may not be proportionate to the capital investment but to share profits. 5. Frozen investment. Withdraw of a partner is not possible (except, a minor partner, upon attaining maturity age). This may lead to discontentment, dissatisfaction leading to lack of commitment. 6. Limited access to capital It is difficult to secure a long term financing. 7. Any dispute or misunderstanding among partners will result in a loss to the business. 8. There is no complete freedom of action since each partner must be consulted every time a decision is made. Dissolution of a
Get Access