Explain five benefits that would be derived and five losses that would be suffered when a sole trader admits other partners.
Explanation
(a) Benefits derived when a sole trader admits other partners:
(i) Additional capital is easier to raise and expansion is possible.
(ii) Losses can be shared among members.
(iii) Specialization is encouraged as each partner brings his expertise to bear in the firm.
(iv) Risks are shared among the partners.
(v) Better decisions are made, leading to efficient management.
(vi) It reduces fatigue; members can take holidays in turn.
(vii) There is the possibility of more profit.
(viii) There is greater degree of continuity.
(b) Losses suffered when a sole trader admits other partners:
(i) Profits are shared among the partners.
(ii) Disagreement among members on issues can affect the smooth running on the firm.
(iii) The misconduct of unscrupulous partners in general can ruin the business.
(iv) The death of a general partner may bring the business to an end.
(v) Loss of pride of ownership.
(v) Delay in decision making slows business activities.