Advantages and Disadvantages of Partnership

In: Business and Management

Submitted By pakhtunova
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Advantages and disadvantages of partnership
Although many people going into business form a sole proprietorship, this is not always possible or desirable. Partnership can be a good alternative to a sole proprietorship. It is a business association consisting of two or more people with a view to make profits. And like any form of business partnership has its advantages and disadvantages.
The main advantage of this form of business is simplicity of formation. There are few legal formalities to complete when setting up the business, the legal procedures for starting a partnership are limited to registering with HM Revenue and Customs. Also, like sole proprietorships they are not subject to public report so the partnership can keep its affairs to itself. What’s more, for partnership it is easier to multiply sources of capital, for example by bringing in new partners. Besides, they often receive favoured treatment by government as well as tax benefits. On top of that, partners can share the work; they will be able to cover each other for holidays and illness. The key decisions are made collaborately so the success of the business isn’t entirely dependent on one person and partners can share the burden.
There are, however, some difficulties associated with this form of business. The main drawback is unlimited liability. Each partner is equally liable for the debts of the business to the full extent of their personal wealth. Besides, having unincorporated status, partners can be sued by customers. Another disadvantage of partnership is that all profits have to be shared among the partners and this can lead to inconsistency where one or more partners aren’t putting a fair share of effort into the running or management of the business, but still reaping the rewards. What’s more, there is always a risk of disagreement among partners and management as all partners are…...

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