A
partnership can overcome a lot of problems faced by the sole trader. Partnership is a type of
business owned by two to twenty members having unlimited liability.
Since
the business is owned and controlled by a number of people, their
rights and responsibilities have to be clearly defined by formulating rules so as to avoid conflict.
Partnership deed is a legal document describes the various rights and duties
of partners, such as initial contribution of capital of each
partner, profit sharing etc.
There
are many advantages for partnerships.
1)
Since a partnership consisting of two to twenty partners it is easy to raise capital than sole
trader.
2) It is easy to sort
out new ideas from partners.
3) The partnership can utilize the expertise of each partner.
4) It has greater possibility of division of labour and specialization.
5) Partnership can avail the benefits
of large scale economies.
6) The partners can share the risk of trading. 7)
There is no legal requirement to
publish financial status of the firm.
8) The size is ideal and suitable for small firms
in service industry such as lawyer, accountants etc.).
There
are some disadvantages for partnership.
1)
In the event of financial problem the liability
of partners are unlimited.
2) The possibility of expansion of size is limited due to the
limitation of number of partnership.
3) In the event of disputes between partners there will be a
problem for continuity of the business.
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