Disadvantages or Demerits of Partnership:

A partnership suffers from certain disadvantages also. They are as follows:

1) Uncertain Existence:

Partnership suffers from the uncertainty of existence. It generally comes to an end on the death, lunacy or insolvency of a partner.

2) Possibility of Disagreement among Partners:

It is generally observed that there is friction and lack of harmony among the partners after the firm has worked for sometime. Mutual conflicts and lack of team spirit among partners may lead to loss of reputation and finally to closure of business.

3) Burden of Unlimited Liability:

Partners are liable for the debts of the firm to an unlimited extent. This acts as a deterrent in investing money in a partnership business. If the business assets are not sufficient in pay off the business liabilities, partners have to sell their personal assets.

4) Lack of Secrecy:

Lack of secrecy happens because business secrets are known to all partners while in case of sole proprietorship they remain confined to a single individual.

4) Non-Transferability of Interest:

A partner cannot transfer his interest in the firm to outsiders without the unanimous consent of all other partners. Thus, a partner feeling necessity of hard cash cannot sell his interest in the firm.

5) Risk and Implied Authority:

Each partner binds other partners by his acts done on behalf of the firm. Thus, the other partners may have to pay for the follies and dishonesty of a fellow partner.

6) Loss of Business Opportunities:

Delay in decision-making due to differences among the partners may result into missing of business opportunities particularly those which have arisen suddenly.