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what are the demerits of partnership firm?


Posted By admin on December 25, 2013 No Comments

Unlimited Liability: All the partners are jointly as well as separately liable for the debt of the firm to an unlimited extent.

Do not have a Separate legal entity: Since partnership firm does not have a separate legal personality of its own, therefore, it cannot enter into contract; sue/be sued by other parties; become a member of a body corporate(except section 25 company);held properties, assets, etc in its own name.

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Uncertain Life: The partnership firm has no legal entity separate from its partners. It comes to an end with the death, insolvency, incapacity or the retirement of any partner. Further, any dissenting member can also give notice at any time for dissolution of partnership.

Lack of Harmony: since in a partnership firm every partner has an equal right to participate in the management, sometimes there is a possibility of friction and quarrel among the partners.

Limited Capital: Since the total number of partners cannot exceed 20, the capital to be raised is always limited.

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No transferability of share: A partner cannot transfer his/her share of interest to outsiders without the consent of other partners.


A partnership firm is being taxed at a flat rate of 30% unlike a sole proprietorship which is being taxed at slab rate.

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