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Advantages of Partnership

As compared to a sole proprietorship a partnership firm has many advantages. Partnership allows arising higher amount of capital. The strains on the sole proprietor can be relieved by sharing the work between two or more partners. Each partner can look after those matters for which he is best fitted. This will lead to benefit of specialization. The partners can consult each others and thy can represent others partners in dealings with third parties. The fear of discontinuance of business is less as compared to slow tradership because of a number of partners who can take care of the business in case of ill-health, insolvency, insanity or death of a partner. The partnership firm has greater chances of survival as it can operate in a large number of lines of business to secure its interests. It can raise more funds because of the personal reputation of the partners.

The advantages of a partnership firm are discussed below:

(i)    Ease of Formation. Formation of a partnership is a simple process. There are no legal formalities involved in its formation as in case of a company. An agreement which may be oral or written, is sufficient to enter into partnership Registration of the firm is not compulsory. But if a firm wants to get itself registered, the procedure is very simple.

(ii)    Flexibility. The firm can undertake any kind of business agreed upon by all the partners. Moreover, there are not much restrictions under the Partnership Act on the manner and mode of management of the firm’s operations. Capital, profit sharing ratio, pricing policy and other terms and conditions of the partnership can be changed easily.

(iii)     Matching of Ownership and Control. The partners who are the proprietors of the firm can also participate in the management of the business. Moreover, there is a relationship between the efforts and rewards as in case of a sole trader. This acts as a motivating factor for the partners to work hard for the success of the business.

(iv)    Impact of Unlimited Liability. The partners are severally and jointly liable for the debts of the firm upto an unlimited extent. This compels them to conduct business carefully by acting as a brake on hasty and reckless decisions. Each partner tends of be cautious and adopts sound business practices in the interest of the partnership business.

(v)    Secrecy. Important secrets of a partnership firm can be maintained as it is not compulsory for it to get its accounts audited and published.

(vi)    Easy Dissolution. Dissolution of affirm is very easy. If the firm is running into losses or any of the partners wished to retire, the firm can be dissolved. There are no legal hurdles involved in dissolution. This helps in protection of minority interest. If a partner feels that his interest re not secure in the firm, he cannot be compelled by the majority partners to remain in the business. He can demand dissolution of partnership.

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