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Saturday, 4 August 2012

Disadvantages of Partnership

Here we discuss about some main and important demerits or disadvantages of partnership. Following are the main disadvantages of partnership :

1. Delay in Decisions :-
In the partnership all the decision are made by mutual consultation. Sometimes delay in decisions becomes the cause of loss.

2. Misunderstanding :-
Generally there is a chance of misunderstanding and dispute among the partners. It becomes the cause of business failure.

3. Unlimited Liability :-
Partners feels risk in the partnership due to limited liability. Because sometime a personal property of the partner can be sold for the clearance of the debts.

4. Limited Life of the Business :-
The life of the business is very limited. If any partner dies or new enters into the business. The old partnership may come to an end . In case of internal differences also it can be dissolved.

5. Legal Defect :-
There are no effective rules and regulations to control the partnership activities. So it can not handle the large scale production.

6. Carelessness :-
In this business the responsibility of the partners is common. So sometime one partner becomes careless about his responsibility and creates problem for the firm.

7. Transfer of Rights :-
No one of the partner can transfer his shares to others without the consent of all the partners. It is a disadvantage in the business.

8. Incapable Servants :-
Generally incapable relatives and friends of the partners are employed. So the efficiency of the firm is affected badly.

9. Lack of Capital :-
No doubt partnership capital is greater than the sole proprietorship. But as compared to the joint stock company it is small. So a business can not be expanded on large scale.

10. Difficulty in Withdrawal :-
It is very difficult for the partners to withdraw the capital from the business. Generally capital is frozen.

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