Sunday, March 28, 2010

DISADVANTAGE OF PARTNERSHIP FIRM

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The disadvantages of partnership firm are as given below:
(1) Uncertain Existence : The partnership firm suffers from the uncertain existence because it can be dissolved at the time of death of insolvency of partner. Thus, the life, of the firm is dependent on the life of the partners. In the same way a business may terminate due to dishonesty of a partner or conflict among partners.

(2) Unlimited Liability : The liability of partners is unlimited. The partners are jointly and separately liable for the debts of the firm. So they try to avoid risks and restrict the expansion and growth of the business.

(3) Difficulty in Prompt Decisions : All important decisions are taken by the consent of all partners. So decisions making process becomes time consuming and loss of business opportunities due to delay in decision making. Usually in business, the spontaneous decisions can only enable the firm to enjoy higher profits, which is not possible in partnership.

(4) Danger of Disputes : Many persons are owners of a partnership firm. Every partner wants to show his importance. Misunderstanding and jealous tendencies are the common weaknesses of the human beings. So there is always a danger dispute among them which may lead business to an end.

(5) Difficulty on Transfer of Shares : A partner cannot transfer his or leave the firm shares without the consent of all other partners. The consent of all other partners is compulsory. So people do not want to invest money in a partnership business.

(6) Risk of Implied Authority ; A dishonest or incompetent partner may lead the firm in difficulties. The other partners will have to meet the obligations incurred by the partner. The provision of implied authority may create problems for the business.

(7) Lack of Public Confidence : The public does not have much confidence in a partnership business. This is because affairs of a partnership business are not open to public scrutiny. Its accounts are not required to be published. There is no much governmental control over the operations of a partnership.

(8) Limited Resources : Modern business needs large amount of capital. But in partnership the resources are limited to the personal funds of the partners. Borrowing capacity of partners is also limited. Even though the capital is more in partnership than in case of sole trading, but still is not sufficient for the smooth conduct and operation of large-scale business.




2 comments:

Unknown said...

Dificults point

Unknown said...

Dificults point

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