Partnership: Definition, Features, Merits & Demerits

What is Partnership?

A partnership exists when two to twenty persons having similar economic interests come together to set up a business purposely to make profits. This fonn of business organization is very common.

Features of Partnership Form of Business

• It can be formed by more than one but not more than twenty persons.
• The risks of the business are jointly home by all the partners except the dormant partner.
• The liability of all partners except the dormant partner is unlimited.
• It affords wider scope of business decision making.

Advantages of Partnership

• It can obtain more capital than a sole proprietor.
• There is a close relationship between partners and their workers and customers.
• Privacy – Its accounts are not open to public inspection.
• Decisions are jointly taken by the partners.
• There is specialization in the business management as the business is formed by two or more persons.
• There is also a wider spread of business risks.

Disadvantages of Sole Proprietorship

• Unlimited liability – the liability of partners in the business is unlimited.
• The death of a member may bring about the end of the business.
• Any dispute among members may lead to the end of the business.
• The possibility of a disagreement over the introduction of a new partner may deny the business of more capital and expertise.
• Limited capital resources due to its inability to raise funds through the Stock Exchange.