10 Merits of Partnership firm

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Merits of Partnership

There are different merits in the partnership form of business. We can find such merits in its establishment, collection of capital, management and control and in the form of social benefits.

  1. Easy to Establish
  2. Collection of Larger Capital
  3. Combined Abilities and Skills
  4. Credit Facility
  5. Prompt and Balanced Decision
  6. Flexibility
  7. Flexibility
  8. Direct Incentives
  9. Secrecy
  10. Protection of Minority Interests

 


Merits of Partnership

  1. Easy to Establish

A partnership firm can be established /formed easily. Partnership business can be easily organized through mutual contract among partners. Neither bothersome legal process nor much expense is needed for it. However, there is compulsory legal provision of registration for a partnership firm in the world.

 

  1. Collection of Larger Capital

It is natural that the capital collected from two or more persons becomes larger than that of a single person. In comparison to a sole trading concern, a partnership firm can utilize business opportunities by collecting more capital.

 

  1. Combined Abilities and Skills

As partnership business organization is conducted by two or more persons. Combined skills, ability, knowledge, experiences etc. of different partners can be used by which the organization gets good opportunity to progress. In this context Kimball and Kimball have said, ”One partner can invest capital, second one can use his experience and service, third one can work for the reputation of the firm in the way that is agreeable and satisfactory.”

  1. Credit Facility

 As the partnership organization is conducted by its partners using their personal and joint efforts, personality, reputation and influence, unlimited liability etc., status of the organization rises up for getting credit/loans from different persons or financial institutions. Besides, a partnership organization can get more amount of loan than a sole trading concern.

  1. Prompt and Balanced Decision

Any decision regarding business affair can be taken quickly in a partnership business organization compared to a company business. As the number of partners in a firm generally remains limited, they can take prompt and proper decisions having discussions, consultation and interactions among them. Such decisions also become balanced as well as valuable.

  1. Division of Risk

In a partnership business organization all its partners jointly bear risks. But in a sole trading concern only the owner has to bear all of the business risks. So partnership becomes suitable in the business in which there is greater possibility of risk.

  1. Flexibility

Partnership is a flexible business. Changes can be made in it without anr difficulty. Changes in objective and location of the firm, increase in capital etc. can be made easily. Size of the firm can be reduced or enlarged as needed.

 

  1. Direct Incentives

As there is direct relation between effort and profit or between hard work and success, the partners become enthusiastic to work hard and earn more profit. Besides, they get encouraged to make more effort to avoid personal liability.

 

  1. Secrecy

Secrecy of a partnership firm can be easily maintained as in the sole trading concern. All the records of the partnership firm such as transaction of the firm, profit and loss, balance sheet, financial records etc. can be kept in secret. No statement of finance of a partnership firm needs to be published as a company needs. This helps the business firm to remain secure from competition.

  1. Protection of Minority Interests

In a partnership firm all the important decisions, policy making, plan formulation etc. need consent of all the partners. This protects the interest of minor partners. There is no chance of using pressure and influence on minority partners by majority as found in a company.

Besides these advantages, continuation of a business firm, possibility of development, good relationship with customers and employees, less burden of taxis, mutual trust etc. are also the added advantages of a partnership firm.

Merits of Partnership

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