Partnership Business: Merits and Demerits of Partnership Business

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Partnership Business: Merits and Demerits of Partnership Business

What is Partnership?

A partnership business ( also called partnership firm) can be a formal, legal term for a business relationship in which two or more people are jointly responsible for the profits and losses of a business entity.

Partnership is when several people work together towards a common goal. A partnership most usually consists of two people, however it can consist of more. All of the people involved in a given partnership are known as each other’s ‘partners’.

The word ‘partnership’ derives from the Latin word ‘partitionem’. This word means ‘an act of sharing’, or ‘a distribution’. This is a good description of what all partnerships involve.

Merits of Partnership Business.

1. Creative solutions. When we have more than one person thinking about a problem, we have more than one solution to that problem.

2. More resources: Finances and other material resources are enhanced in a partnership. Because partners in a business are jointly liable for the profits and losses of that business, you can always count on your partner for financial support.

3. Saving time. Projects get completed more quickly when several people are working on them together.

4. Better decision making. When several people are involved in making a decision, there is less margin for error as each person can check the other’s recklessness.

5. Sociability. Humans are by nature sociable animals, who love to build communities and projects together. Partnership fulfills this need.

6. Added prestige. If your business partner has prestige in the business world, they will bring their clout to your partnership.

7. Greater capacity for loans. Partnerships are more likely to be approved for loans by credit companies than businesses with just one proprietor. Moreover, partners will be able to borrow a larger amount of money for their business than sole proprietors will.

8. Easier to start a new venture. The startup costs of a new business can be prohibitive. However, when you have a partner to help you to spread the costs, starting a new business will be much easier.

9. Holiday flexibility. If you have a partner to run things in your absence, you can take holidays without having to close down your business.

10. Sharing responsibility. Having sole responsibility for a business or any project can be stressful and daunting. It is so much less so when you have a partner to help you out at every turn.

11. More skills: Two people will have a much broader combined skill set than a single person working alone.

Demerits of Partnership Business.

1. Lack of spontaneity. When you have to check all of your decisions with your partner before you put them into action, you may feel that your life lacks spontaneity, and that you are missing out on fleeting opportunities.

2. Feeling tied down. When you have made an agreement to form a partnership (a legal business partnership), that partnership can take a lot of time and money to dissolve. And yet, you may feel tied down to your partner against your will.

3. The potential for disagreement. Disagreements with your partner can be devastating for the shared projects that you are working on together. If you both have differences of opinion very often, and you find yourselves unable to compromise, the partnership will grind to a halt.

4. Sharing profits. When you are the sole owner of the business, all of the profits go to you. When you have a partner, however, you must share the profits with them.

5. Limiting your scope. When you enter into a partnership with someone, you usually agree on certain limitations to how you will both behave. For instance, you may agree not to expand your business into certain areas of the market. These agreements may feel limiting in future years.

6. Lack of a leader. When everyone is an equal partner, it can be hard to choose a leader when you need one. When it is unclear who is the authority figure at a time of crisis, your projects can really suffer as a result. In addition, if partners do not have clearly defined roles (not just leaders and followers, but other roles as well), the productivity of your business will start to falter.

7. Veto. When there are several partners in a business and you all need to agree on something for it to go ahead, disruptive partners might decide to veto all of your decisions.

8. Debts: In most cases, partners individually and severally responsible for the debts of the partnership business.

9. Hard to innovate: When working with a partner, some people feel that their creativity is being held back.


Partnerships can be very powerful phenomena, both in business and in everyday life. Working in partnership can be a total joy, as you and your partner(s) bounce ideas off each other, experience the communal bond of striving together towards a common goal, and maximize your profits by spreading out your startup costs and each supporting the other emotionally and financially.

However, working in partnership can also have its drawbacks. Disagreements can occur, and can dramatically disrupt the workings of your partnership, for instance. And if your partner is not good with money, or if they are simply unscrupulous, you may well be left to pick up the pieces after they have caused significant damage to your business venture.

The bottom line is that it is very important to choose your partners wisely. Choose someone that you know you can rely on, and whom you are willing to stick together with through thick and thin for at least a few years. In addition, make sure to select a partner that you genuinely enjoy working with: working in partnership should be enjoyable as well as time efficient and profitable!

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