Advantages And Disadvantages of Partnership

by • 24/06/2013 • GeneralComments (0)394

Q.2      Discusses the advantages & disadvantages of partnership?

Ans:    ADVANTAGES MERITS Of PARTNERSHIP

Partnership has the following merits advantages:

1.         CAREFUL DECISIONS

Under the partnership, decision is not taken by an individual but by ail the partners after a great deal of discussion. It reduces the chance for wrong decision.

2.         DIVISION OF WORK

This management of business is not by a single person but is divided among difference partners, it creates division of works and they can make better supervision of the business.

3.         MORE CAPITAL

More capital can be invested than in case of individual proprietorship.

4.         LARGE SCALE PRODUCTION

The sources of business are increased due to many partners. By investing a huge amount of capital, these partners can reap the advantages of large-scale production.

5.         DIVISION OF LABOUR

The division of labour becomes easy under the partnership because of the large-scale production. Thus, these partners can reap the benefits of the division of labour also.

6.         USE OF MACHINES

Due to the availability of sufficient of capital and production being on large scale, the use to machines can be increased under the partnership. It leads to the low cost of production and rapid production

7.         EASY CREDIT

It becomes easy to get credit in the partnership because the responsibility of repayment of loans does not reset on an individual but on all the partners. The creditor feels more secure in advancing loans to than to the individual proprietor.

8.         PERSONAL INTEREST

Each partner takes personal interesting the business because, because he has an unlimited liability and has to bear the risk of profit or loss. Therefore, every partner takes full personal interest in the business.

9.         A EASY TO FORM

Partnership is simple to form and generally requires little formality (though a partnership agreement in written form is often used and is advisable).

10.       SWIFT ADJUSTMENT

There is a capacity of swift adjustment to change, resulting from the personal interest and day-to-day control by the partners.

11.       DIVISION OF RESPONSIBILITIES

Division of responsibilities and a spreading of the workload are possible amongst the partners.

12.       JOINT CONSULTATION

The necessity of joint consultation may diminish the Chance oif arriving at unwise decisions.

13.       TAX FACILITY

In partnership business every partner pay tax individually.

14.       EASY TO DISSOLVE

The dissolution of partnership is very easy- If a partner dies, or becomes insolvent or becomes unsound mind or gives a notice for the dissolution of partnership business is dissolved this all the partner’s can also dissolved the business at any time with their mutual consent. In the event of insolvency burdens rest on all the partners.

15.       LESS COMPETITION
 

There is a less competition if partnership firm is registered and no one can start his business with registered partnership firm.

16.       NO FRAUDS

In partnership business the accounts can be checked and inspected by all the partner at any time, so there is less chance of frauds in such business.

17.       ENTRY OF NEW PARTNER

If any number of partnership business wishes leave the firm of new member wants to joining the partnership business, the partner with consolation can introduced the new partner on the business and can allow the disinterested one to leave the partnership business.

18.       MUTUAL CONSOLATION

Interest of the partners are common and due to his every vigilantly watches the business affairs. They discuss and consult the business affairs with one another and try to overcome the business problems. It develops mutual understanding and confidence among partners.

19.       CONSUMER’S TASTE

In partnership business it is’ possible to develop wider personal contacts with the consumers. Goods are produced according to the taste, likings and disliking of the consumers. It extends the market.

20.       COOP MUTUAL RELATIONS

Partnership responds promptly to charge in business conditions. There is no red tapism. Good working relation exits between their workers and the management, which develops mutual understanding, love and confidence. They are all conducive to production.

21.       COMBINED ABILITES AND JUSCEMENT

Since this type of organization facilities combining of capital with business brains of tow or more persons, efficient and economical management of the business is ensured.

22.       BETTER PUBLIC RELATIONS

In a partnership too, as in the case of a sole trader, the partners evidence, greater interest in attending to the needs of customers as well asm employees of the firm. By this they are able to maintain “personal Touch’1 with the customers as well as employees, which have become very essential for the success of the business.

23.       BETTER DECISIONS

In partnership division of work can be easily done because of more than one person can take better decisions for the whole betterment.

24.       PERSONAL INTEREST

Since the responsibility of the partners is unlimited in partnership, so they take interest in business.

25.       MINORITY PROTECTION

In partnership all the matters are to be seceded with the consent of each partner, so there is a protection to the minority protection.

 

DISADVANTAGES/DEMERITS OP PARTNERSHIP

1.         LACK OP MUTUAL CONFIDENCE

The success of partnership depends upon the mutual confidence of the partners. They may have mutual confidence at the start of business, but it goes on shaking by and by and collapses one day. In the absence of mutual confidence the business gets set-back and may be closed down.

2.         PERSONAL DISPUTES

Partnership leads to several personal disputes, which in turn disturb the proper functioning of the business.

3.         DIFFICULT TO SEPARATE

No partner can sell his shares to others according to his wishes. Therefore, one cannot separate from the business without the permission of other partner.

4.         DELAY IN DECISION

Sometimes partners do not agreement with each other on a particular issue and the decision may not be reached for lack of consent of all. It makes unnecessary delay in decisions and the business is adversely affected.

5.         DIFFICULT TO CLOSE

When one or more partners want to leave the business or want to close down the business, the difficulty arises in the distribution.

6.         UNLIMITED LIABILITY

There is less possibility of taking risk because of the unlimited liability under the partnership.

7.         LACK OF RESPONSIBILITY

Under partnership, every partner is equally responsible in the business. It is generally said that ‘every man’s responsibility is no man’s responsibility/ So, lack of responsibility is a hindrance in the way of the business prosperity.

8.         UNCERTAINTY

The existence of the partnership is quite uncertain. The businesses closed down due to the misunderstandings or the death of a partner. Thus, the partnership is quite uncertain.

9.         ABSENCE OF A READY MARKET

The absence of a ready market is simply means for the transfer of shares in a hindrance to enterprise.

10.       SHORTAGE OF CAPITAL

Available of capital may be adversely affected by a partner’s death when his share is withdrawn, so as to pay beneficiaries. Shortage of capital reduces the sale of production. Nothing is allocated for research. Innovation process is suspended services of skilled personnel are not hired. They all affected the cost of production.

11.       LACK OF CONTINUITY

There is an absence of continuity for example on death, retirement or bankruptcy of one partner.

12.       LEGAL DEFECT

There are no effective rules and regulation to control the partnership business. Partnership business cannot run on large scale. 

13.       CARELESSNESS

In partnership business, the responsibility of the partners is common. Due to this reason sometimes one partner in partnership business becomes careless about his responsibility and create much difficulty for the business

14.       TRANSFER OF RIGHTS

In partnership business no one partner can transfer his shares to other persons without the consent of all the other partners of the partnership business.

15.       DIFFICULTY IN WITHDRAWAL

It is very easy to invest funds in partnership business but it is very difficult to withdraw capital from the business.

16.       INSTABILITY OF BUSINESS

The partnership form of organization is most unstable. Since it dissolved as the death, insolvency or insanity of any partner in the firm.

17.       LACK OF CONFIDENCE

In the absence of legal formalities binding the partnerships no partnership enjoys public confidence. Woman check out the URL habitually controlled by pride will sometimes allow herself

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