Disadvantages of Partnership

Disadvantages of Partnership

Partnership is a form of business in which 2 or more people decide to indulge themselves in to business activities with the main aim making profit. The people are referred as partners and each partner has to provide money and time for the business. A partner may decide not to give his or her time to the business but then the partner will be called a sleeping partner. In this article I am going to discuss some of the disadvantages of partnership.

Business: answerplanet.com is a partnership and it has 4 partners with each partner having a share of 25%. The names of the partners are A, B, C, and D.

Share the profits

When the business earns profit the profit has to be shared. For example if a business earns 10,000 in a month and the business has 4 partners, with an equal share of 25%, then each partner will receive $2500.

Bound by the decision of other partners

If Partner D commits a mistake then all the other partners will be bound by the decision. For example if the business suffers loss by the decision made by Partner D then the other partners are also liable for the loss. They cannot separate themselves from the loss because they are sharing both profits and losses. The decisions of one partner affect all other partners. That is why the partners should think considerably more before assigning roles to the partners.

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