Introduction
A partnership is a simple form of business ownership comprising few members. Even though partners enjoy a significant advantage in operations such as large capital contributions, cases of fallout are rampant, especially when there is a misunderstanding among the people involved. First, the facet of unlimited liability makes a partnership company risky. For instance, in case of liquidation, a partner may be forced to clear the outstanding debts, especially when the other member fails to contribute. In addition, since the agreement requires profits and losses to be shared equally, in the event of damages caused by one party, the other participant will bear the consequences equally.
Discussion
Generally, a partnership is built on mutual trust between the partners. Supposing one party acts against the established reliance, the whole firm might be impacted negatively (Alshurideh et al., 2022). For instance, a member may opt to start a different business that competes with the partnership leading to a conflict of interest. Similarly, an individual may fail to contribute the agreed amount towards the operations, causing mistrust. The mentioned conducts can potentially harm the productivity of the business.
Furthermore, in a partnership, one party’s acts can negatively affect the other member who acted in good faith. For instance, if a partner engages in fraudulent activities, the firm may incur legal charges (Yan et al., 2020). In addition, practicing unethical conduct may affect the image of the business leading to losses. In a partnership, partners face legal, management, tax, and personal liabilities.
Conclusion
The participants must contribute equally towards the mentioned obligation. For example, if a business engages in illegal or a partner participates in unlawful activity, all the parties must be held responsible for the actions. Therefore, it is essential for partners to act accordingly in such joint firms to minimize negative impacts on business performance.
References
Alshurideh, M., Kurdi, B., Alzoubi, H., Obeidat, B., Hamadneh, S., & Ahmad, A. (2022). The influence of supply chain partners’ integrations on organizational performance: The moderating role of trust. Uncertain Supply Chain Management, 10(4), 1191-1202. Web.
Yan, J., Li, X., Shi, Y., Sun, S., & Wang, H. (2020). The effect of intention analysis-based fraud detection systems in repeated supply Chain quality inspection: A context of learning and contract. Information & Management, 57(3). Web.