What are the advantages of partnership form of organisation?

The advantages of partnership form of organisation?

Partnership form of organisation is suitable for medium size business where personal efforts of entrepreneurs are essential. The following are the advantages of partnership:

Easy to form: This is a suitable type of organisation requiring no legal formalities. No formal documents are required to be prepared as is necessary in case of joint stock company. A simple agreement among partners is sufficient to start partnership firm. A partnership deed is not necessary though it is advisable to prepare it. Even the registration of firm is optional.

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Large Resources: The resources of more than one person are available for the business. The partners can contribute to start a moderately large scale concern. More partners can be added if capital needs are large. The partnership concerns can also arrange funds from the outside sources.

Greater Managerial Talent: The partners may be assigned duties according to their talent. Different functional departments may be managed and controlled by different partners. The talent, expertise and knowledge of partners in different fields can be used for the welfare of the business. It will help to increase the efficiency of the business resulting in more profits.

More Credit-standing: The partners may have sufficient contacts in the market. They can offer more securities to the financial institutions. The liability of partners being unlimited, they will be able to raise more finances. As compared to a sole-trade business, partnership concern has more credit worthiness.

Promptness in Decision Making: The partners meet frequently and they can take prompt decisions. The firm will not lose any business opportunities becuase of delay in taking a decision.


Sharing of Risk: The risk of business is shared by more persons. The burden of every partner will be much less as compared to the burden of sole trade. Furthermore, the business expansion will not be hampered for fear of risk.

Relationship between Reward and Work: The partners try to put more labour to earn more and more profits. There is a direct relationship between reward and work. The more they work, the more will they be benefited.

More Possibility of Growth and Expansion: As compared to a sole-trade business, partnership concern has more possibilities for expansion and growth of business activities. The partner can contribute more and manage the activities more systematically.

Close Supervision: The partners themselves look after the business; so they can avoid wastages. They have direct access to the employees and can encourage them for more production. The management of partnership is much cheaper as compared to a joint stock company where experts are paid higher salaries.


Flexibility of Operations: There is no statutory obligation to seek aproval from government before making major changes in the business set-up. There can be any change in managerial set-up, capital and scale of operations. These changes can be made easily depending upon the business opportunities.

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