Sunday, March 28, 2010

ADVANTAGE OF PARTNERSHIP FIRM

earth

Partnership firm is an association of persons who have agreed to carry on business with a view to make profit. The advantages of partnership firm are given below:

(1) Easy to form and Dissolve : A simple agreement among partners is sufficient to register a partnership. No other formal documents and legal formalities are required. It is equally easy and inexpensive to dissolve a partnership.

(2) More Resources : Partnership is a combination of several persons. So more capitals can be collected and advantages of large scale business may be obtained. More partners can be added if capital needs are large.


(3) Harmonization of Different Abilities : In partnership firm, there is a harmonization of different abilities of different partners. The talent, expertise and knowledge of partners in different fields can be used for the welfare of the business. So, there is more chance for the advancement of business.

(4) Credit Facility : The ability of partners being unlimited they will be able to borrow more capital. As compared to sole trading concern, partnership has more credit worthiness. More securities can be provided by a partnership firm to the finance institutions and other creditors.


(5) Appropriate Decisions : In partners decisions are taken by consensus of all partners. So they take appropriate decisions and there is less chance of incorrectness. Fear of unlimited liability encourages caution and care, thus, puts a brake on hasty and reckless decisions.

(6) More Inspiration : There is more inspiration to work because partners think that the result of their hard work will be rewarded in the form of more profits to them.

(7) Close Supervision : The partners themselves look after the business, so they avoid wastage. They have direct access to employees and can encourage them for more production.

(8) Secrecy : The business affairs and accounts of the partnership do not require publicity by law as in companies. So, partners can keep business secrets within themselves.

(9) Flexible : In partnership firm, there can be any change in managerial set-up, capital, and scale of production. These changes can be made by the mutual agreement between partners. Thus, it enjoys flexibility.

(10) Protection of Minority Interests : Every partner has a right to participate in the management of the business. All important decisions are taken by the consent of all partners. In event of disagreement minority may even Veto a resolution. Hence, it protects the interest of minor partners.

(11) Reduced Risk : The losses incurred by the firm will be shared by all partners. So loss of each partner will be less in comparison to sole trading concern.




0 comments:

Post a Comment