Why is partnership considered by some to be a relatively unpopular form of business ownership? Explain the merits and limitations of partnership.

Partnership considered by some to be a relatively unpopular form of business ownership as it has several limitations. But it has certain merits too. So here are some of them:

Merits:

i. Formation of a partnership firm is easy and its closure is also not a difficult task. One can form by signing an agreement.

ii. The decision-making process in a partnership form is more balanced as compared to another form of business.

iii. A large number of funds can be raised due to several partners involved in the business. This can help in the growth of the business.

iv. The risk involved in the business is shared by all the partners and hence helped in reducing risk by one only.

v. Confidentiality is an important feature of partnership firm and the members maintain secrecy in its operations.

Limitation

i. Partners have to repay debts from personal assets in case of insufficient resources.

ii. There is a restriction on the number of partners involved for which they cannot support large scale operation due to lack of resources.

iii. In partnership farm, the power of decision making is shared by the members. The differences in opinion result in conflict.

iv. A fresh agreement is required by the members to run their business if their partnership comes to an end.

v. There is a lack of public confidence as a partnership firm are not legally binding.