What are the advantages and disadvantages of the firm?
The six advantages of the firm are as follows.
- The firm establishment is relatively easy because it does not require a deed of establishment.
- The continuity of the company is guaranteed
- Capital accumulation can be obtained greater than individuals
- It is easy to get credit from other parties because they have more excellent financial capabilities
- The risk is lighter because the firm’s threat is not borne alone but shared by the owners
- More excellent management capability because of the division of labor among the members
Four disadvantages of the firm are as follows
- The owner’s liability is not limited to the company’s debts. If the firm has an obligation, then personal wealth is the guarantee for debt repayment.
- Difficulties in managing management because all owners can control the running of the company
- An ally’s mistake can result in losses for the firm that must be borne jointly.
- Decision-making will experience difficulties because every decision must be based on other owners’ agreements.
