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Demerits of Partnership

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Demerits of Partnership

Partnership has aforementioned advantages or merits. It has also some disadvantages as mentioned below.

  • Limited Resources
  • Unlimited Liability
  • Mutual Conflict
  • Uncertain Life
  • Lack of Public Confidence
  • Difficulty in Transfer of Interest
  • Delay in Decision-making
  • Leakage of Secrecy

 


Demerits of Partnership

  1. Limited Resources

Although more capital can be collected in a partnership form of business, it is impossible to collect a large amount of capital as needed for conducting a modem partnership business organization. Due to this limitation of partnership business, larger scale company business was initiated.

  1. Unlimited Liability

Unlimited liability is the major disadvantage of partnership business in which its owner or partners have to bear unlimited liability. In case of loss in the business firm, the partners have to pay off the liability even using their personal property. The fear of such unlimited liability may affect the courage and enthusiasm of the partners.

  1. Mutual Conflict

Misunderstanding and differences in thought, idea, concept, nature, desire etc’ of the partners of the same firm can bring conflict among them. As a result, it becomes difficult to build proper coordination in mutual interest Lack of team spirit leads to loss of reputation and even to premature closure of business.

 

  1. Uncertain Life

In case of sudden death or bankruptcy or insanity of any partner’ a successfully run business firm stops all at once. Similarly, a partnership firm can be dissolved due to dishonesty and misunderstanding among the partner. In this way, the partnership life remains uncertain and temporary.

  1. Lack of Public Confidence

Because of limited legal provision, no compulsion of publicizing business report and relatively less stability, people are found less confident about a partnership firm’ A partnership firm does not enjoy the trust of the public’

  1. Difficulty in Transfer of Interest

The partner of a partnership firm cannot easily transfer his interest or ownership to any other person. He can transfer it only with the consent of all the fellow partners’ even only one of them disagrees, it becomes impossible to transfer it. But the shareholders of a company can easily transfer their share to others.

  1. Delay in Decision-makingAll the partners ale necessary for taking any decision on the affair of a partnership firm’ This is a time consuming process. In some cases if decision is not taken at opportune time, the firm has to suffer losses and an important chance may slip away’
  2. Leakage of Secrecy
    In comparison to a sole trading concern, there is possibility of leakage of secrecy in partnership business. As all the partners have the rights to look into accounts, any of them may expose. The financial condition in case of misunderstanding’.In this way, these are the disadvantages of a partnership firm. Although supposed to be better than a sole trading concern, partnership is not suitable for the large scale business firm’

 

 

 

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