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Answer.

In spite of above advantages, there are certain drawbacks also associated with the partnership form of business organisation, this includes;-

(a) Unlimited Liability: In partnership firm, the liability of partners is unlimited. Just as in proprietorship, the partners’ personal assets may be at risk if the business cannot pay its debts.

(b) Divided Authority: Sometimes the earlier stated maxim of two heads better than one may turn into “too many cooks spoil the broth.” Each partner can discharge his responsibilities in his concerned individual area. But, in case of areas like policy formulation for the whole enterprise, there are chances for conflicts between the partners.

(c) Lack of Continuity: Death or withdrawal of one partner causes the partnership to come to an end. So, there remains uncertainty in continuity of partnership.

(d) Risk of Implied Authority: Each partner is an agent for the partnership business. Hence, the decisions made by him bind all the partners. At times, an incompetent partner may lend the firm into difficulties by taking wrong decisions. Risk involved in decisions taken by one partner is to be borne by other partners also. Choosing a business partner is, therefore, much like choosing a marriage mate life partner.

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