IGCSE, A Level Business Student Forum

Q4 Analyse the disadvantages of a partnership. [6]

Possible Structure:
[KN]
[AN]
[AN+]

[KN]
[AN]
[AN+]

(kn) shared profit
(an) one person might invest more into the business then the other and get less revenue
(an+) which might discourage a person to put effort into the business
(kn)conflicts
(an)the two people might not agree on the same decision instability for the business
(an+) making it look like to other investors that the business isn't doing good

[KN] Conflicts may arise
[AN] Differences on opinions and conflicts may also arise which can lead to disruptions as partners wont be ready to cooperate with each other.
[AN+] Thus Decision making may become slower and less efficient.

[KN] Profit Sharing
[AN] partnerships involve sharing profits with other partners, which means that individual partners may receive a smaller share of the business's profits compared to another partner who is receiving higher in amount.
[AN+] Thus leads to conflicts and business may shut down due to this

[KN] Partners can disagree on business decision.
[AN] This means thats there would be conflict between partners which would increase the time taken to make decisions.
[AN+] This would result in breaking the partnership.
[KN] There would be profit sharing between the partners.
[AN] Some partners would receive more profit and some would receive less profit.
[AN+] This would result in less savings.

[KN] Shared Financial resources
[AN] In a partnership, multiple partners contribute their capital to the business. This shared financial resource base allows the business to access more funds than a sole proprietorship
[AN+] This increased capital can be used for investments, expanding operations, or dealing with unexpected financial challenges.

[KN] Diverse skill set
[AN] Partnerships often bring together individuals with different skills, experiences, and knowledge. This diversity can be a significant advantage.
[AN+] This complementary skill set can enhance decision-making and problem-solving. It also allows for the division of labor, where each partner can focus on what they do best, ultimately improving the overall efficiency and success of the business.

[KN]share of profits
[AN]because of which conflicts between the partners may rise as the profits are not shared equally,
[AN+]because of which business would not be able to expand

[KN]Partners are responsible for other partner debt in case of anything happen to other partner
[AN]Thus this could lead business to sell to his assets in order to pay debt
[AN+]Because of this business could lead to budget deficit.

[KN] Profit sharing.
[AN] In Partnerships all the owners/shareholders have to divide their profits between them.
[AN+] More profits being divided among shareholders will mean less capital being reinvested in the business.

[KN] Unlimited liability.
[AN] In partnerships there are unlimited liabilities and every partner is responsible for paying off the business's debts.
[AN+] Even those partners have to pay back liabilities to those who weren't involved in getting that loan.

[KN]shared decision making
[AN]This can lead to slower decision-making compared to a sole proprietorship
[AN+]Disagreements among partners can also arise, potentially causing conflicts and hindering progress.

[KN]Shared Profits and Losses
[AN] it also means that individual partners receive a smaller share of the profits compared to a sole proprietor.
[AN+]Additionally, if the business incurs losses, each partner is personally liable for a portion of the debt.

(Kn) profits shared (an) unlike in the case of a sole trader who gets to keep all the profits, in a partnership, the profits are divided among the partners (an+) this can discourage further investment as whatever the business makes is just divided

(Kn) longer decision making time (an) in a partnership business all the partners must be consulted with before taking a decision and all the partners myst agree on it (an+) such can take up alot of time which results in inefficiency

[KN] profit shared
[AN] if an share holder has invested a amount which is greater but still he is getting divided profit
[AN+] this would lead to low motivation to work for the business

[KN] decision making
[AN] many conflicts may rise about the important decision that is made for the business on who makes them
[AN+] due to this their would be bad management by the business administration

[kn] decision making is done together
[an] both partners have different mindset's which is beneficial however at some point may cause contradictions between the two
[an+] leading to arguments' and disagreements causing no step to be taken forward
[kn] there is no separate legal entity therefore if one owner died then the business/partnership would end
[an] thus one of the partners would have to suffers a loss of the entire debt and since partnership's are limited liability the owner will have to pay off loans through his personal savings
[an+] causing severe loss and difficulties for the other partner

[KN] Unlimited Liability
[AN] Since a partnership is an unincorporated business, the owner's equity remains at stake of loss in case the business shuts down.
[AN] This increases the risk of contributing as a partner, especially through financial investments, as there is no security for the amounts invested by the partners.

[KN] Profits have to be shared
[AN] In a partnership, all partners are owners of the business, and so, are entitled to a share of the profits earned by the business.
[AN] This means that the amount earned by the original owner on his/her investment might decrease as the business becomes a partnership.

[KN] profit shared
[AN] In a partnership, all partners are owners of the business, and so, are entitled to a share of the profits earned by the business.
[AN+] this would lead to low motivation to work for the business

[KN] Disagreements on each other opinions.
[AN] This refers to conflicts which may arise if partners decisions do not match, which can lead to slower decision making
[AN+] Thus this can be a motion ride for the business as it may loose sales due to delay in decisions.

[KN] Shared profits.
[AN] One partner may work hard than the other but still the profits will be shared equally which can lead to demotivation as they would have earned more if worked separately and individually.
[AN+] Thus this can lead to loss of productivity and cooperation b/w the partners.

Kumail Alvi wrote: ↑Wed Nov 01, 2023 11:46 pm [KN] Profit sharing.
[AN] In Partnerships all the owners/shareholders have to divide their profits between them.
[AN+] More profits being divided among shareholders will mean less capital being reinvested in the business.

[KN] Unlimited liability.
[AN] In partnerships there are unlimited liabilities and every partner is responsible for paying off the business's debts.
[AN+] Even those partners have to pay back liabilities to those who weren't involved in getting that loan.

both analysis points arent giving an impact of the knowledge point rather its an explaination