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S.No. Partnership Disadvantages: 1 Partner's Liability Is Usually Unlimited

Partnerships have some disadvantages: 1. Partners have unlimited liability for the partnership's debts and obligations. 2. Partnerships dissolve if any partner leaves. 3. Partnerships cannot usually provide a floating charge over their assets to secure loans. However, these disadvantages can be addressed. A written partnership agreement can define terms if a partner leaves and prevent instability. While partnerships cannot provide floating charges, partners' personal assets can still be used as collateral to secure loans. Successful partnerships becoming corporations does not demonstrate limitations, as founders' visions are important and boards can distract from business focus.

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Syed Mujtaba Ahmed Qadri
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25 views4 pages

S.No. Partnership Disadvantages: 1 Partner's Liability Is Usually Unlimited

Partnerships have some disadvantages: 1. Partners have unlimited liability for the partnership's debts and obligations. 2. Partnerships dissolve if any partner leaves. 3. Partnerships cannot usually provide a floating charge over their assets to secure loans. However, these disadvantages can be addressed. A written partnership agreement can define terms if a partner leaves and prevent instability. While partnerships cannot provide floating charges, partners' personal assets can still be used as collateral to secure loans. Successful partnerships becoming corporations does not demonstrate limitations, as founders' visions are important and boards can distract from business focus.

Uploaded by

Syed Mujtaba Ahmed Qadri
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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S.No.

Partnership Disadvantages

Partner's liability is usually unlimited

Partnerships are dissolved when any of the parner leaves i

A partnership may not usually give a floating charge on


its assets

Many successful partnerships turned into corporate


sector after achieving huge success which demonstrates
the limitations of the partnership business.

Counter points
In company, member's have limited liability thus
preventing them from the risk of business failure. This
can only negatively affect the creditor as if the business
is not doing good then the creditor may not be interested
to lend money t the business.

A written partnership agreement can easily resolve the


matter. In case of the absence of written agreement, then
partnership act by the government shall be efective.
However, written agreement fills in the details which the
law could not imply. A written agreement serves to
override terms otherwise implied by partnership act.
Additional clauses can be developed, which can prevent
any partner from immediately leaving the business and
thus preventing the istability.

Partnerships can not enjoy the leverage of floating


charges on its assets, however as the ownerhave
unlimited liability in business and all its personal fixed
assets can also be shown to the creditors to borrow
capital, therefore owner's assets and firm's assets make
sum of considerable fixed assets, which can esily
guarantee the creditor to lend money in business.

Where there are examples of partnerships listing their


business, this can not be related to limitations of
partnerships rather this shall be linked to the strategic
decision of the owner of the companies. This approach
can also distruct the business from its real purpose and
focus, as we have examples of companies after involving
share holders lost the direction and focus due to newly
inducted board members acquiring powers for decision.
Apple Inc illustrates the most relevant example as in 90's
board members became so strong that even the founder
of the business Steve Jobs had to step down. However
after Jobs, company didnot maintain sustainability and
the board requested Jobs to retain the position of
CEO.This very case illustrates the importance of founder
and owner's vision for the business which can not be
challenged in case of partnership or firms.

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