What are the ultimate advantages of Partnership form of business?

Advantages of Partnership

Partnership firm or enterprise offers the following advantages.

1. Easy formation:

A partnership can be easily formed without much formality. An agreement either verbal or written is required to form a partnership business. A partnership firm even need not be registered.

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2. Large financial recourses:

The financial requirement of a partnership firm is much more as compared to that of a sole proprietorship. The firms enjoy better credit in the market. This enables the firms to have a large scale operation.

3. Better managerial talent:


A partnership firm as a form of business organization enjoys better managerial talent. It ensures a blend of various types of talents. One partner may specialize in marketing and other in financial management.

This leads to effective division of labour and specialization. Partnership also combines money and talent conveniently. There may be some partners having money but no talent, there might be others having talent but no money.

Such persons join together and take advantage of each other’s abilities and form the business unit.

4. Flexibility:

Partnership business is flexible in nature. A change in the number of partners, amount of capital, place of business etc. can be made without much difficulty. They also jointly can decide to bring any charge in operation of the business.


5. Promptness in decision-making:

In a partnership type of enterprise, decisions can be taken quickly and effectively. Decisions are more appropriate as these are taken after joint consultation of all the partners. It is further helping in taking hasty and reckless decisions.

6. Division of labour:

Partnership type of enterprise ensures the benefits of division of labour. Different aspects of the work are divided among the partners themselves.

For example, one partner may be in charge of accounts, others may handles correspondence and yet another may take up marketing. This ensures efficient and effective performance.

7. Lesser risk:

The losses incurred by the firm are shared by all partners. The burden of loss does not fall on one individual as in case of sole proprietor. The losses are too shared among the partners on the basis of profit sharing ratio.

8. Possibilities of expansion and growth:


Large resources, favorable credit facilities and diversified managerial ability are an added advantage with the firm for further growth and expansion.

9. Protection on minority interest:

In a partnership type of enterprise, the rights of all the part-nets are protected. Every partner is associated in the decision making process of the partnership firm.

10. Secrecy:

Secrecy can be ensured in partnership firm. The decisions taken restricted with the partners only. The partnership enterprise is not under statutory obligation to publish its accounts, as in the case of a joint stock company.

11. Incentive for hard work:

Partners are the owners of the firm. The profit of the firm belongs to them. In order to maximize he profit all the partners work hard. Maximization of profit acts as incentives to hard work.

12. Merits from the point of view of the society:

From the view point of society two specific advantages flow from partnership. These are:

(i) Proper utilization of resources:

Partnership enterprise encourages better utilization of available resources to easy by setting up business units. It also motivates other prospective entrepreneurships to come forward and set up new units.

(ii) Wealth Distribution:

Partnership is one of the simplest forms of organization, which can be formed by any two or more persons at every where. If not fully. This form of business is treated as potential competitors of big units locally.

The said firm generate surplus, re invest the same and may become a big unit on a future period of time. Thus it improves the economic strategy of that locality.

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