Advantages of Partnership Business Disadvantages of Partnership Business is Partnership business has certain advantages over and above proprietorship business. These advantages are as follows:
Advantages of Partnership Business
- Joint ownership and more strength: Partnership business is a form of joint ownership of several persons and possesses more financial and managerial strengths than proprietorship business.
- Combination of expertise: Different persons possess different skills expertise. Through formation of partnership the skills of different persons may be combined and harnessed to launch a successful business.
- Advantages of unlimited liability and integrated entity: Partnership has no separate entity and liability of partners is unlimited. For unlimited liability, partners can borrow more money, as their personal assets are also liable for business debt.
- Easy formation: partnership business can be easily formed, as many legal formalities need not be carried out.
- Maintenance of secrecy: some extent business secrecy can be maintained in the partnership business than the public limited companies, where information disclosure is legal requirement.
- Maintenance of personal contact: Partner in partnership business is directly involved in the direction and management of the company, so they can maintain personal contact with the customers. Personal contact with customers accelerates is business success.
- Team spirit: Partnership is a kind of joint venture, so cooperation and team spirit are necessary for its success. Conflicts and controversies may cause termination to partnership. The partnership develops a culture of cooperation among the partners.
- Equal right of all partners: The partners in the partnership business enjoy equal rights. Even a single partner or any minority can play a vital role in decision making, management and dissolution of a firm.
- Flexibility in alteration and operation: A partnership business can be easily altered acceding to the changed situation and the new experience of the partnership. Strict formalities need not be carried out.
- Easy dissolution: Partnership business can be easily dissolved, as few legal formalities are involved.
Thus, partnership is a joint venture of individuals; it has some unique advantages over proprietorship business in running business in business on some larger scale.
Disadvantages Partnership Business
In spite of various advantages partnership business suffers from some disadvantages. Which are as follows?
- No separate entity: Partnership business has no separate entity like joint stock companies. As a result partner suffer from some disadvantages; because the partners” properties of the business same status in the eye of law.
- Conflict among partners: Partner’s individual power is more than a shareholder in company. As partnership is an association of persons. Who may be of different attitudes and cultures? so there is always a fear of conflate among partner. Which consequently may cause dissolution?
- Limited financial abilities: Partnership business may grow and expand over time beyond the total financial abilities of the partners. Because of limited number of partners and their financial abilities, capital constraints may arise and thus, block business expansion.
- Poor public confidence: partnership firm has no legal status. Consequently, public confidence upend it is poor in comparison to that enjoyed by companies or corporations. As a result sufficient credit may not be available.
- Fear of dishonesty and conspiracy: Any partner dishonesty and conspiracy, Which may cause losses to the business and all partner may be affected.
- Lack of swiftness decision making: Unlike proprietorship business the decision making in partnership is time consuming, as all or majority of the partners are required to be one headed for any decision.
- Poor coordination: Different partners may be of different opinions, so prompt coordination may be different in partnership business.
- Long term liability: A partner may be liable for business debt, even after a longer period of his retirement from the business.
Thus, a partnership business suffers from a number of disadvantages.