Bacoconsultants
A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits.
MERITS:
- Easy to set up.
- Owner has complete control – not answerable to anybody else.
- No legal formalities.
- Owner keeps all profits.
- Able to choose times and patterns of working.
- Able to establish close personal relationships with staff ( if any are employed ) and customers.
- The business can be based on the interests or skills of the owner rather than working as an employee for a larger firm.
- Partners may specialise in different areas of business management.
- Shared decision making.
- Additional capital injected by each partner.
- Business losses shared between the partners.
- Greater privacy and fewer legal formalities than corporate organisations (companies)
DE MERITS:
- Unlimited liability – all of owner’s assets are potentially at risk.
- Often faces intense competition from bigger firms, for example food retailing .
- Owner is unable to specialise in areas of the business that are most interesting – is responsible for all aspects of management.
- Difficult to raise additional capital.
- Long hours often necessary to make business pay.
- Lack of continuity – as the business does not have separate legal status, when the owner dies the business ends too.
- Unlimited liability for all partners ( with some exceptions ) .
- Profits are shared .
- There is, as with sole traders , no continuity and the partnership will have to be reformed in the event of the death of one of the partners.
- All partners are bound by the decisions of any one of them.
- Not possible to raise capital from selling shares.
- A sole trader, taking on partners, will lose independence of decision making.