Partnership: Definition, Features, Merits & Demerits

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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.

Partnership
Partnership

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.