Advantage and disadvantage of partnership
Advantage of partnership
1. Ease and low cost of formation
The legal requirements are limited of registering the of the business and purchasing whatever licenses that are needed
2. Availability of capital and credit.
Partners can pool their funds so that their business has more capital than would be available to a sole proprietorship. This additional capital, coupled with general partners
Unlimited liability can form the basis for a good credit rating and suppliers may often be more willing to extend credit to such a partnership than to an individual owner. It is thus possible to expand business more easily. Moreover, new partner may easily be admitted to cope with new experience.
3. Retention off profits and sharing losses.
All profits and losses are shared among the partners.
4. Personal interest.
General partners are very much concerned with the operation of the firm.
5. Combined business skills and knowledge.
Partners often have complimentary skills e.g. A firm of lawyers will have several partners each being an expert n a particular field. Moreover, the ability to come up with a solution in case of difficulty is greater, through mutual discussion. The work is also divided among the partners depending on the skills one has and this reduces the load of each Partner.
The legal requirements are limited of registering the of the business and purchasing whatever licenses that are needed
2. Availability of capital and credit.
Partners can pool their funds so that their business has more capital than would be available to a sole proprietorship. This additional capital, coupled with general partners
Unlimited liability can form the basis for a good credit rating and suppliers may often be more willing to extend credit to such a partnership than to an individual owner. It is thus possible to expand business more easily. Moreover, new partner may easily be admitted to cope with new experience.
3. Retention off profits and sharing losses.
All profits and losses are shared among the partners.
4. Personal interest.
General partners are very much concerned with the operation of the firm.
5. Combined business skills and knowledge.
Partners often have complimentary skills e.g. A firm of lawyers will have several partners each being an expert n a particular field. Moreover, the ability to come up with a solution in case of difficulty is greater, through mutual discussion. The work is also divided among the partners depending on the skills one has and this reduces the load of each Partner.
Disadvantage of partnerships
1.
Unlimited
liability
General partners run the risk of having to use their personal asset to pay creditors.
Limited partners, however, risk only their original investment.
2. Lack of continuity
Partnership are terminated in the event of the death, withdrawal or legally declared incompetence of any one of the general partners.
3. Effect of partners disagreement
Partners are liable to disagree on various matters affecting business. This may create unpleasantness and may slow or even retard the firm’s progress.
4. Mistake on one partners
If one partner make a mistake e.g. a poor deal, all the partners have to suffer the consequences.
5. Profit from one’s effort
If one partner works hard, the profit arising out of his labour, is shared by all the partners. This often demotivates such a hard working partner.
6. Relieving on one partner.
A firm, which relies heavily on one partner, has a chance of filling if a partner leaves or dies. Such a partner also may take an undue Advantage of his position.
7. Share profit.
Each partner shared profits, which reduces the amount receivable.
8. Protracted discussion.
Lengthened discussion lead to delays in decision making and sometimes resulting in a failure to advantage of a particularly attractive bargain.
General partners run the risk of having to use their personal asset to pay creditors.
Limited partners, however, risk only their original investment.
2. Lack of continuity
Partnership are terminated in the event of the death, withdrawal or legally declared incompetence of any one of the general partners.
3. Effect of partners disagreement
Partners are liable to disagree on various matters affecting business. This may create unpleasantness and may slow or even retard the firm’s progress.
4. Mistake on one partners
If one partner make a mistake e.g. a poor deal, all the partners have to suffer the consequences.
5. Profit from one’s effort
If one partner works hard, the profit arising out of his labour, is shared by all the partners. This often demotivates such a hard working partner.
6. Relieving on one partner.
A firm, which relies heavily on one partner, has a chance of filling if a partner leaves or dies. Such a partner also may take an undue Advantage of his position.
7. Share profit.
Each partner shared profits, which reduces the amount receivable.
8. Protracted discussion.
Lengthened discussion lead to delays in decision making and sometimes resulting in a failure to advantage of a particularly attractive bargain.
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