Question

‘Two heads are better than one.’

Justify the above statement with the help of advantages of the partnership form of business over sole proprietorship.

Answer 1

Partnership form of business overcomes the inherent limitations of sole proprietorship:

1. Limited capital: All investments are made by the proprietor. Though, if required, he/she has access to loans and debts to procure funds for business.
2. Limited managerial ability: What is to be done? how is it to be done? and when is it to be done? All affairs are managed and controlled by the sole proprietor.
3. Limited continuity: A sole proprietorship may face discontinuity in the event of the proprietor’s death or incapacity. A partnership can continue with the remaining partners, ensuring greater stability and continuity.