Advantages and Disadvantages of Partnership

Advantages and Disadvantages of Partnership

Advantages and Disadvantages of Partnership

Partnership is an agreement or a contract between two or more partners to indulge in a business. Partnership deed is a written agreement among the partners which helps in resolving some disputes in future. In order to enter in to partnership deed, partner’s role and level of authority, financial contribution, procedure for ending the partnership has to be taken in to consideration.

Advantages of Partnership:

  1. There is a mutual trust and shared control in management among the partners.

  2. Partnership is an easy and economical to make registration.

  3. Lesser documents are required for its registration.

  4. It is easy to dissolve the partnership in case of disputes and it is legally supported by an act.

  5. Sharing of profits and losses among the partners makes mutually beneficial.

  6. Business is easy to establish when there is a partnership and start up costs would be lesser.

  7. There are lesser limitation from outside regulation

  8. There will be a greater borrowing capacity and there will be a larger tax savings.

  9. Sharing of partner’s skills and collaboration in making strategies would render greater beneficial to the business.

  10. Partnership can be easily dissolved with the consent of partners according to the agreement.

Disadvantages of Partnership:

  1. The partners are jointly responsible for all the debts and the losses incurring in the business.

  2. It is very difficult to withdraw any funds from the business.

  3. Disputes may arise among the partners in decision making or due to different thoughts and ideas.

  4. There are chances to misuse the financial resources by the partners.

  5. It is not easier to transfer one’s person stake to another without the prior consent of the partners.

  6. There is instability as partnership gets dissolved when the partners retire or die or resign and may cause sudden panic in the profitable business.

  7. The authority between the partners is not clearly mentioned about the responsibilities.

  8. If the business becomes insolvent, then the personal assets of the members of partnership may cover the debts.

  9. It has some limitations when the business grows in to a larger one.

  10. Disagreements may occur between the partners leading to ending of partnership deed.

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