Advantages of Partnership

Advantages of Partnership

The main advantages of Partnership are given below:

i. Easy formation

The formation of partnership firm requires fulfillment of lesser legal formalities than other types of organisation. What required  is just an agreement, which can be oral or written. Registrationof partnership is optional. Further, even if a firm wants to get itself registered, the registration process is very simple.

ii. Availability of larger resources

The combined capital of all the partners and the greater borrowing capacity make available larger financial resources. New partners can also be taken into partnership to secure more capital. As a result, expansion of the business unit becomes feasible.

iii. Benefit of consultation

Two heads are better than one. Wise decision can be possible when the issues and subject matters are thoroughly discussed. There is no place for hasty decisions.

iv. Division of Work and greater managerial efficiency

The staggering load of management work can be judiciously distributed among the partners according to their experience, knowledge and taste. For example, one partner can look after purchases, another sales, yet another accounting etc. Thus when the burden is lightened, supervision by each partner over the allocated area of management becomes effective and efficient. This ensures greater managerial efficiency.

v. Reduced Risk

The risk of each partner is reduced considerably since the loss sustained by the firm is shared by all the partners.

vi. Unlimited liability and credit standing

The liability of a sole trader is unlimited. Since, apart from his business assets, even his private properties are also available for satisfying the claims of creditors. Hence, creditors may give more loans because they can get back the loan from the personal properties of sole traders. Thus high credit rating helps sole trader to borrow more funds from suppliers and banks.

vii. Safeguard of the Minority Interest

For all the vital matters unanimous consent of each partner is required. If there is no unanimity, such decisions are not accepted.

viii. Easy Dissolution

The dissolution of the partnership is also very simple. In the case of partnership at will, a 14 days notice by a partner in this connection is enough. No legal hurdle is there for dissolving the firm.