Question

Discuss the merits and demerits of partnership business

Answer 1

Merits of partnership firm
Easy to start and dissolve
Higher capital
Higher innovation
Reduction of work load
Better decision
Harmonization of different ability
Credit facility
Close supervision
Flexible
Reduced risk

Demerits of partnership firm
No Business secrets
Uncertain existence
No Personal contact
Unlimited liability
Delay in decisions
Danger of conflict
Difficulty in transfer of shares
Limited resources

Answer 2

MERITS OF PARTNERSHIP

• Easy to form :- It is very easy to form a partnership firm as no legal formalities are required to be completed. Even registration of partnership firm is not compulsory according to Partnership Act.
• Larger Financial Resources :- In partnership firm all the partners contributes some amount of capital. As a result the financial resources of partner ship firm are larger than the sole proprietorship firm or joint Hindu family business.

DEMERITS OF PARTNERSHIP

• Unlimited liability :- The liability of all the partners is unlimited. In case of losses, the partners will not only lose their business property but creditors can claim over their personal property also to get their accounts settled.
• Conflicts :- The partners in partnership firm come from different backgrounds, different families, therefore, they may have differences of opinion. It partners adopt a Rigid attitude then it may lead to conflict among the partners.