• Home
  • Finance
    • Financial Management
    • Strategic Management
    • Investment Analysis and Portfolio Management
    • Project Management
    • Islamic Banking & Finance
    • Auditing
  • Marketing
    • Principle of Marketing
    • Marketing Management
    • International Marketing
    • Advertising & Promotion
    • Commercial Challenges
  • HRM
    • Human Resource Management
    • Principles of Management
    • Training & Development
    • Employee Performance Management
  • Others
    • Introduction to Business
    • Business Communication
    • Banking & Finance
    • Entrepreneurship
    • Economics
  • Personal Skills
  • Tips & Tricks
  • About Us
    • Contact US

Business Study Notes

B.Com, M.Com. BBA & MBA Exam Study Online

  • Home
  • Finance
    • Financial Management
    • Strategic Management
    • Investment Analysis and Portfolio Management
    • Project Management
    • Islamic Banking & Finance
    • Auditing
  • Marketing
    • Principle of Marketing
    • Marketing Management
    • International Marketing
    • Advertising & Promotion
    • Commercial Challenges
  • HRM
    • Human Resource Management
    • Principles of Management
    • Training & Development
    • Employee Performance Management
  • Others
    • Introduction to Business
    • Business Communication
    • Banking & Finance
    • Entrepreneurship
    • Economics
  • Personal Skills
  • Tips & Tricks
  • About Us
    • Contact US
Home » What Are The Advantages and Disadvantages of Partnership?

What Are The Advantages and Disadvantages of Partnership?

By Richard Daniels Reading Time: 3 mins
Updated August 7, 2020

Before moving towards the advantages and disadvantages of partnership, it is important to know what partnership? A partnership is an association of two or more persons to carry on a business and share its profit and loss among them”.

It is not the same as a sole proprietorship, where a single person may take the capital and start his business. In partnership two or persons get together, bring capital, organized the business activities and share the profit and loss as per the agreement and capital ratio.

Advantages and Disadvantages of Partnership

It is formed to meet the need for more capital, division of work, effective supervision and control and spreading of risk in business. Important fundamentals of Business:

  • Association of at least two persons.
  • Contractual relation.
  • Earning profit.
  • Mutual agency.

Advantages and Disadvantages of Partnership

Partnership Definition | Types of Partnership | Dissolution of Partnership

  • Advantages of Partnership

The main advantages of partnership business are as under

Easy to Form

The main advantage of a partnership is that it can be easily organized. There are no legal formalities required in this type of business. The partners enter into a partnership and start a business.

Favorable Credit Standing

The second merit is partnership enjoys a better credit rating in the eyes of creditors. As the liability of each partner in the organization is unlimited, the financial institutions can safely advance loans to the firms.

Large Capital

Another advantage is that it brings more and more capital to the business by the joint efforts of the partners.

Greater Management Ability

As we know that there are many partners involved in the business operation of the partnership, due to which the firm can distribute the duties and responsibilities to each partner as best suited to him.

Profit Incentive

The profit is always shared by the partners according to the agreement.

Tax Advantages

It is a registered firm, so they pay tax to the government on dividends and then share profit among the partnership, which leads the partners to get the benefit of lower assessment.

Advantages of Secrecy

As the partners can keep the business secrets with themselves leads not to require any law to publish its profit and loss account and balance sheet.

Ease of Dissolution

The partnership can easily be dissolved with the mutual consent of partners or according to the contract. There is no formal document to be drawn up as in the case of a joint-stock company.

  • Disadvantages of Partnership

The main disadvantages of a partnership are as under

Unlimited Liability

One of the basic demerits of partnership is that the partners are personally and jointly responsible for all the debts of the firm. In case the business suffers losses and then the personal property of partners can be sold under the court order for the clearance of the debts of the business.

Limited Life of Firm

The second demerit is that the duration of business is always uncertain. It can be dissolved in case of a partner’s death, withdraws and sell his interest, etc.

Frozen Investment

It is very easy to invest his money in the partnership by a partner but very difficult to withdraw any funds from the business.

Dispute Among the Partners

As we know that every partner has his own thought of views, in this type of business sometime dispute occurred among the partners on decision making, so quick action required to be taken by all the partners for the remedial measurement.

Possibility of Misuse of Resources

As the resources of the firm are owned by the partners jointly leads to misuse of these resources by the partner/ partners.

Loss of Business Opportunities

One of the demerits is that in case of differences in view among the partners, a delay may take place in decision-making. This can cause loss to the business.

Lack of Public Confidence

Partnership forms of organization may not be enjoying public confidence due to a lack of publicity and regulations.

Author at Business Study Notes
Richard DanielsAuthor at Business Study Notes

Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
Love my efforts? Don't forget to share this blog.

Related Posts:

  • What are the Advantages and Disadvantages Sole…
    What are the Advantages and Disadvantages Sole Proprietorship?
  • Communication Strategies Definition | Types of Communication…
    Communication Strategies Definition | Types of Communication Strategies
  • What is the Process of Motivation? Explain in detail
    What is the Process of Motivation? Explain in detail
  • Financial Ratio Analysis | List of Financial Ratios
    Financial Ratio Analysis | List of Financial Ratios
  • Partnership – Types and Dissolution of Partnership
    Partnership – Types and Dissolution of Partnership

Filed Under: Introduction to Business, Others Tagged With: partnership advantages, partnership business definition, partnership disadvantages

Related Posts

System-Views-of-Management-image

System Views of Management

System Views System views of management associates with the Management division of the organization and it assumes that all of the organizations are … [Read More...]

Leadership Theories

Situational Leadership Theories

Situational Leadership Theories Situational model of leadership is a factor that emphasizes the behavior of the leaders regarding different situations. … [Read More...]

Behavioral Leadership Model

Behavioral Leadership Model

Leadership  Leadership is the most critical and complex responsibility across any organization. It is because the leadership requires to be realistic, … [Read More...]

career development process in hrm

Career Development Process

Career Development Process Today's career development process has become a threat for students, especially a question that may stun many students who have … [Read More...]

Strategic leadership

Strategic Leadership Model

Strategic Leadership Model The strategic leadership model is basically the study of the leadership style. It describes the ways of modernizing an … [Read More...]

Types of Managerial Decision Making

Types of Managerial Decision Making

Managerial Decision Making Decision Making is an art of selection of one feasible alternative decision from many. Therefore types of managerial decision … [Read More...]

Quantitative-management-approach

Quantitative Management Approach

Quantitative Management Approach The quantitative management approach is used to enhance decision making power by using quantitative tools. As well as … [Read More...]

Effective-business-messages-image

Effective Business Messages

Effective Business Messages The process through which business messages are effectively prepared that have the potential to create desired results from … [Read More...]

Search the Site

ADVERTISEMENT

Business Study Notes

Business Study Notes is all about business studies or business education. Visit us to find here free business notes of all the subjects of B.com, M.com, BBA & MBA online.

Disclaimer

All the images and videos present on the Business Study Notes are not owned by us, if you found anything under copyrights, please Contact Us, we will remove it ASAP.

Categories

© Copyright 2023 Business Study Notes. All rights reserved. Privacy Policy, Sitemap.  
DMCA
PROTECTED