Top ten advantages of partnership firm

Running a business alone can be a daunting task. A sole proprietorship firm has limited capital, limited managerial skills and cannot carry out businesses on a large scale. If two or more persons agree to carry on business for their mutual advantage by contributing finance and skills, such a business is termed as partnership business.

A partnership firm is an association of persons who have come together with a view to carry out business in common and with a view to make profit.

Easy to commence and dissolve

With a simple agreement among partners and registration office, a partnership firm is sufficient to start up the business. The registration process is simple and it is equally easy and inexpensive to dissolve partnership business.

More capital formation

Partnership business is formed when two or more partners combine to do business. Capital formation is easier

  • All partners contribute capital as per their agreement and thus large amount of capital is collected
  • The extra capital provides advantages of large scale operation.
  • More partners can be added if capital needs to be increased.

Combined abilities and skills

Partnership is a combination of people with varied knowledge, skills, talents, abilities and experiences.

As partnership firm uses these skills to conduct the business operation, it increases the efficiency resulting in more profit.

Credit facility

The liability of partners being unlimited, they are able to borrow more capital. As compared to sole trading concern partnership has more credit worthiness. More security can be provided by partnership firm to the financial institutions and other creditors.

Quick decisions

There exist regular meeting and consultations among the partners which helps in quick decision making particularly as regard to response to change in business environment.

I think most of us are raised with preconceived notions of the choices we're supposed to make. We waste so much time making decisions based on someone else's idea of our happiness. - Sandra Bullock


Partnership firm are not required to publicize their financial statements to the general public and thus secrets remain within partners only.

Direct motivation

In partnership firm both ownership and control are rested in a same person and there is always direct relationship between efforts and rewards.

This motivates each and every partner to work hard and inspires them to take personal interest in success of business.

Close supervision

The partners themselves look after business so they avoid wastage. They have direct access to the employees and can encourage them for more production.


In a partnership business there can be change in managerial setup such as capital profit sharing ratio, scale of production and pricing policy. These changes can be made through mutual agreement between the partners.

Reduces risk

In partnership business, the risk of losses is shared among the partners according their agreement and proportion of their investment. This reduces risk of individual partners.