Limitations of the one-man business give rise to another form of business organisation, partnership. Two, three or more people combine, contribute capital, and agree to Share profits and bear losses in agreed proportions
This form of organisation offers several advantages over the one-man business
(j) It commands larger resources.
tii) It is possible to establish wider personal contacts.
(iii) Business can be run on a larger scale enjoying the various economies of scale.
(iv) The union of ownership and management is a spur to efficient and economical working.
(v) Partnership responds promptly to changes in business conditions and is very highly adaptable. There is no red-tapping.
(vi) The existence of unlimited liability curbs the speculative tendencies of the partners, and prevents the launching of rash and risky enterprises
Disadvantages of Partnership
If the partners work in close and cordial co-operation, the business is bound to go up. But this is a very big IF.
(i) In actual practice. partners behave in a selfish manner, doing the minimum and trying to get the maximum out of the business.
(ii) According to the law, partnership must be
dissolved in the event of a partner’s retirement. death,
bankruptcy or lunacy. There is thus no continuity of
(iii) But the great handicap is the unlimited liability. The unlimited liability makes the policy of the firm timid and unenterprising.
(iv) Further, the partnership resources are too limited to enable the concern to do big business. On the whole, this form of organisation cannot meet the requirements of modem trade and industry.