Advantages of Partnership
The main advantages of Partnership are
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.
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.
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.
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.
The risk of each partner is reduced
considerably since the loss sustained by the firm is shared by all the
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.
For all the vital matters unanimous
consent of each partner is required. If there is no unanimity, such decisions
are not accepted.
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