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Disadvantages of partnerships

      

Disadvantages of partnerships

  

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Faith
The partnership has the following disadvantages:
(a) The chief weaknesses of the partnership is personal liability of each partner. If for instance one partner enters a contract that forces the firm to be bankrupt, all the partners are liable to cover the debts, i.e. each one of them can be followed regardless of whether he/she is the one who entered into the contract. The decisions made by any partner are binding to the others.
(b) Lack of continuity:
The death of a partner dissolves the business—also the disability of a partner may force an end to the business. The acceptance of a partner to buy the interest of the dead partner is not always easy.
(c) Frozen investments:
In case of one partner wanting to leave, it may be difficult for him to withdraw his funds from a going concern. The remaining partners may not have enough money to purchase the shares of the departing partner, or they may be unable to agree on taking on a new partner who could supply the funds. It may also be difficult to agree on a fair price for each partner's shares. Therefore before entering a partnership one must realise that withdrawal of money could be a problem.
Titany answered the question on October 26, 2021 at 13:00


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