Advantages of Partnerships

Easy to form:
Like sole proprietorships, partnership businesses can be formed easily without any compulsary legal formalities. It is not necessary to get the firm registered. A simple agreement or parnership deed, either oral or in writing, is sufficient to create a partnership.

Note: Registration of the parnership is voluntary in most states. However it would be best to check up the rules of your state to be sure. In states like Maharashtra, registration is almost compulsory.

Availability of large resources:
Since two or more partners join hands to start a partnership business, it may be possible to pool together more resources as compared to a sole proprietorship. The partners can contribute more capital, more effort and more time for the business.

Better decisions:
The partners are the owners of the business. Each of them has equal right to participate in the management of the business. In case of any conflict, they can sit together to solve the problem. Since all partners participate in the decision-making process, there is less scope for reckless and hasty decisions.

Flexibility in operations:
A partnership firm is a flexible organization. At any time, the partners can decide to change the size or nature of the business or area of it’s operation. There is no need to follow any legal procedure. Only the consent of all the partners is required.

Sharing risks:
In a partnership firm all the partners “share” the business risks. For example, if there are three partners and the firm makes a loss of Rs.12,000 in a particular period, then all partners may share it and the individual burden will be Rs.4000 only. Because of this, the partners may be encouraged to take up more risk and hence expand their business more.

Protection of interest of each partner:
In a partnership firm, every partner has an equal say in decision making and the management of the business. If any decision goes against the interest of any partner, he can prevent the decision from being taken. In extreme cases an unsatisfied partner may withdraw from the business and can dissolve it. In such extreme cases the “partnership deed” is required. In absence of the partnership deed, no legal protection is given to the partners.

Benefits of specialization:
Since all the partners are owners of the business, they can actively participate in every aspect of business as per their specialization, knowledge and experience. If you want to start a firm to provide legal consultancy to people, then one partner may deal with civil cases, one in criminal cases, and another in labor cases and so on as per the individual specialization. Similarly, two or more doctors of different specialization may start a clinic in partnership.

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