Limitations of Partnership
Some of the chief drawbacks or limitations existing in the partnership form of business organisation, might be mentioned as under:
(1) Evils of Mutual conflicts- All the partners are entitled to participate in the working of the firm. More fre-lquently, there might arise conflicts among them on trifling matters, which result into evil consequences. In the opinionbof Prof. Haney, there is the lack of centralised direction asbthe main defect, and the creation of co-ordination among the interests of all, the biggest problem.
(2) Less Permanence or Durability- The partnership firm is not permanent or more enduring, like the company form of organisation. With the occurrence of the death, insolvency or lunacy of any partner, the firm’s existence disappears and it is dissolved unless it is re-organised.
(3) Unnecessary delay in decisions- All the decisions, particularly those relating to important matters, are taken collectively. Hence, very often, the suitable business opportunities are lost due to the causation of undue delay in the matter.
(4) Unlimited Liability- In the partnership firm, the
liability of every partner is unlimited. Due to such limitation, often the partners may have to dispose off even their personal property for payment of the firm’s liabilities. Thus, one might lose the earnings of his whole life sometimes.
(5) Limited Capital Resources- As compared to the company form of organisation, the capital in a partnership firm is quite limited. The members subscribing to the capital, are also few in number. Of course, in comparison to the sole proprietorship, the capital resources in partnership firm are quite liberal and flexible too.
(6) Problem in Transferring the Interests- In the
firm, no partner could transfer his interest to any one else without the consent of the other partners. Thus, the partners find it difficult and inconvenient to transfer their interests to the other members.
(7) Unsuitable for large Scale Businesses- Due to
the limited liability and restriction on transferring of interests to others, this form of organisation is considered to be unsuitable for the large scale businesses. The partnership firm is also not able to avail of the savings of the masses.
(8) Lack of Essential Qualities among Partners- The success of partnership firm mostly depends upon the mutual confidence of partners, their loyalty, honesty, cordiality, etc. But it is difficult to find all such
alities among all partners. The negligence of any partner could create problem or even run in the partnership.
(9) Lethargy Possible in Management- Ordinarily, all the partners are not equally capable of managing the firm efficiently. If one partner doesn’t perform his supervising duty efficiently, we can’t hope or expect it from the other partners also. Thus, there exists the fear of lethargy in the management and direction of the firm.
(10) Uneconomic and Extravagant Organisation-In the partnership firm, the partners generally form the opinion that the money is not being spent from their personal pocket, rather it is collective and common. Hence, very often the partnership becomes uneconomic organisation.