ADVANTAGES AND DISADVANTAGES OF PARTNERSHIPS

ADVANTAGES AND DISADVANTAGES OF PARTNERSHIPS - troublesome....

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ADVANTAGES AND DISADVANTAGES OF PARTNERSHIPS Why do people choose partnerships? One major advantage of a partnership is that the skills and resources of two or more individuals can be combined . For example, a large public accounting firm such as Ernst & Young must have expertise in auditing, taxation, and management consulting. In addition, a partnership is easily formed and is relatively free from governmental regulations and restrictions . A partnership does not have to contend with the “red tape” that a corporation must face. Also, decisions can be made quickly on substantive matters affecting the firm; there is no board of directors that must be consulted. On the other hand, partnerships also have some major disadvantages: mutual agency , limited life , and unlimited liability . Unlimited liability is particularly
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Unformatted text preview: troublesome. Many individuals fear they may lose not only their initial investment but also their personal assets, if those assets are needed to pay partnership creditors. As a result, partnerships often find it difficult to obtain large amounts of investment capital. That is one reason why the largest business enterprises in the United States are corporations, not partnerships. The advantages and disadvantages of the partnership form of business organization are summarized in Illustration H-2. Illustration H-2 Advantages and disadvantages of a partnership Advantages Disadvantages Combining skills and resources of two or more individuals Mutual agency Ease of formation Limited life Freedom from governmental regulations and restrictions Unlimited...
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