Question

Merits and demerita partnership as business organization

Answer 1

ʜᴇʏᴀ ᴜsᴇʀ! 

ᴍᴇʀɪᴛs ᴏғ ᴘᴀʀᴛɴᴇʀsʜɪᴘ: 

①ᴇᴀsʏ ғᴏʀᴍᴀᴛɪᴏɴ: ᴛʜᴇʀᴇ ɪs ɴᴏ ɴᴇᴇᴅ ᴛᴏ ᴏʙsᴇʀᴠᴇ ᴀɴʏ ʟᴇɢᴀʟ ғᴏʀᴍᴀʟɪᴛɪᴇs ғᴏʀ ᴛʜᴇ ᴇsᴛᴀʙʟɪsʜᴍᴇɴᴛ ᴏғ ᴘᴀʀᴛɴᴇʀsʜɪᴘ. 

②ʙᴀʟᴀɴᴄᴇ ᴅᴇᴄɪsɪᴏɴ: ᴘᴀʀᴛɴᴇʀsʜɪᴘ ᴏʀɢᴀɴɪsᴀᴛɪᴏɴ ɪs ᴀ ɢʀᴏᴜᴘ ᴏғ ᴘᴇᴏᴘʟᴇ ᴡɪᴛʜ ᴅɪғғᴇʀᴇɴᴛ ϙᴜᴀʟɪᴛɪᴇs ᴀɴᴅ ᴡʜᴀᴛᴇᴠᴇʀ ᴅᴇᴄɪsɪᴏɴ ᴀʀᴇ ᴛᴀᴋᴇɴ ɪɴ ᴛʜᴀᴛ ᴀʀᴇ ʙᴀsᴇᴅ ᴏɴ ᴄᴏɴsᴜʟᴛᴀᴛɪᴏɴ ᴀᴍᴏɴɢ ᴀʟʟ ᴛʜᴇ ᴘᴀʀᴛɴᴇʀs. 

③sᴇᴄʀᴇᴄʏ: ᴛʜᴇ ᴀᴄᴄᴏᴜɴᴛs ᴏғ ᴘᴀʀᴛɴᴇʀsʜɪᴘ ғɪʀᴍs ᴀʀᴇ ɴᴏᴛ ᴘʀᴇsᴇɴᴛᴇᴅ ʙᴇғᴏʀᴇ ᴛʜᴇ ᴘᴜʙʟɪᴄ ᴀs ɪs ᴛʜᴇ ᴄᴀsᴇ ᴡɪᴛʜ ᴛʜᴇ ᴄᴏᴍᴘᴀɴɪᴇs.

ᴅᴇᴍᴇʀɪᴛs ᴏғ ᴘᴀʀᴛɴᴇʀsʜɪᴘ: 

①ᴜɴʟɪᴍɪᴛᴇᴅ ʟɪᴀʙɪʟɪᴛʏ: ɪɴ ᴘᴀʀᴛɴᴇʀsʜɪᴘ ᴇᴠᴇʀʏ ᴘᴀʀᴛ ɪɪ ʜᴀs ᴀɴ ᴜɴʟɪᴍɪᴛᴇᴅ ʟɪᴀʙɪʟɪᴛʏ ɪɴ ᴏᴛʜᴇʀ ᴡᴏʀᴅs ᴇᴠᴇʀʏ ᴘᴀʀᴛɴᴇʀ ɪs ʀᴇsᴘᴏɴsɪʙʟᴇ ᴄᴏʟʟᴇᴄᴛɪᴠᴇʟʏ ᴀɴᴅ ɪɴᴅɪᴠɪᴅᴜᴀʟʟʏ ғᴏʀ ᴀʟʟ ᴛʜᴇ ʟɪᴀʙɪʟɪᴛɪᴇs ᴏғ ᴛʜᴇ ᴘᴀʀᴛɴᴇʀsʜɪᴘ. 

②ʟɪᴍɪᴛᴇᴅ ʀᴇsᴏᴜʀᴄᴇ: ᴛʜᴇ ғɪɴᴀɴᴄɪᴀʟ ʀᴇsᴏᴜʀᴄᴇs ʀᴇᴍᴀɪɴ ᴄᴏɴғɪɴᴇᴅ ᴛᴏ ᴛʜᴇ ᴄᴀᴘɪᴛᴀʟ ᴏғ ᴛʜᴇ ᴘᴀʀᴛɴᴇʀ ᴀɴᴅ ᴛʜᴇɪʀ ᴄᴀᴘᴀᴄɪᴛʏ ᴛᴏ ʀᴀɪsᴇ ʟᴏᴀɴs. 


③ʟᴀᴄᴋ ᴏғ ᴄᴏɴᴛɪɴᴜɪᴛʏ: ᴛʜᴇ ᴇxɪsᴛᴇɴᴄᴇ ᴏғ ᴘᴀʀᴛɴᴇʀsʜɪᴘ ɪs ᴠᴇʀʏ ᴜɴᴄᴇʀᴛᴀɪɴ. 

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.