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PROS AND CONS OF PARTNERSHIP
By enabling partners to pool their resources and labour, a successful partnership can contribute to the success of a business. The majority of lone owners lack the time and resources necessary to manage a profitable business on their own, and starting a firm can take a lot of time. By forming a partnership, the parties can take advantage of one other’s labour, experience, and knowledge. Furthermore, a cunning partner might offer other viewpoints and ideas that can aid in the expansion of the company. However, entering a partnership carries an extra risk. The partners may also take on liability for any losses or debts incurred by the other partners in addition to splitting earnings. Additionally, there is a greater likelihood of mismanagement or conflict. It could be more difficult to come to an agreement over the sale of the company when the time comes to leave.PROS | CONS |
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Partners can combine their resources, including money and labour. | Partners could have more responsibilities or debts. |
Task sharing between partners promotes a better work-life balance. | Disagreement or poor management are more likely. |
The firm can benefit from the experience and fresh viewpoints that more partners can offer. | The business may become more difficult to sell. |
DISSOLUTION OF PARTNERSHIP FIRMS
Despite the best intentions, partnership firms may encounter situations where dissolution becomes necessary. Dissolution refers to the legal termination of a partnership, resulting in the cessation of business operations. There are several reasons why a partnership firm may dissolve, including:- Mutual Agreement: Partners may decide to dissolve the legal document by mutual agreement. This typically occurs when partners no longer wish to continue the business or when the partnership’s objectives have been fulfilled.
- Expiration of Term: If the partnership deed specifies a fixed term for the association, the firm may automatically dissolve upon the expiry of that term unless renewed by mutual consent.
- Death or Insolvency of a Partner: The death or insolvency of a partner can lead to the dissolution. In such cases, the remaining partners may choose to continue the business or opt for dissolution.
- Misconduct or Breach of Contract: Instances of misconduct or breach of contract by one or more partners may lead to the dissolution. Legal proceedings may be initiated to dissolve the partnership and settle any disputes.