What are the Shortcomings of Business Partnerships?
“It is not easy to maintain accord among partners because they may have diverse views and may not agree on certain crucial matters. ”
The first and foremost draw back of a business partnership concerns the unlimited liability of the partners. The partners are not only legally responsible for their business investments but their personal possessions can also be undertaken in lieu of business liabilities. As a result, the partners attempt to avoid risks and this checks the opening out and growth of such a business.
Then, there is the limitation in raising added sources for extension purposes. The business resources are restricted to the level of personal funds. Borrowing capability of partners is also inadequate. The number of partners that can be added to a business is also not unlimited.
A banking company, on an average, cannot have more than ten partners and in other ventures the number of partners cannot go beyond twenty. The partnership concerns also have to put up with the improbability of time. It is because a partnership can only be dissolved under very special circumstances. Not even the death of one or more partners can lead to its dissolution.
It is not easy to maintain accord among partners because they may have diverse views and may not see eye to eye on some topics. Lack of trust in one another is also a major hurdle in the stability of partnerships.
All the more no type of transference of shares to any third party is possible without the consent of all the partners. If a partner desires his shares back it is not possible without the endorsement of the other partners and without the disbanding of the firm.
In partnership, a partner is permanently bound to it. A partner can bind the business by his acts and is taken to be a devout agent of the business. So, a deceitful partner may lead the business to meet its waterloo.
Another point that raises doubts regarding the functioning of partnerships is the fact that the accounts of partnership enterprises are not made available to anybody. As a result, public is ignorant regarding the exact situation of such businesses.
Usually, there are widespread misgivings in public mind that these concerns take home massive income to the detriment of customer. Even governments cannot bind them to make their accounts open in public interest except in certain rare circumstances.
Author - DeeKay
Tags - Finance, Economy
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