Advantages or Merits of Partnership:

As a form of business organization, partnership claims the following advantages:

1) Ease of Formation:

Like a sole trading business, a partnership can also be easily formed. There is no legal formality to be fulfilled. Thus the initial expenses are not much.

2) Combined Ability and Skill:

A partnership combines business abilities and skills of many persons. Partners among themselves provide various sorts of talents necessary for handling the problems of the firm. This results into balanced judgment and efficient management of the firm.

3) Augmentation of Greater Capital and Credit:

This is an important relative advantage of partnership over sole trading concerns. The combined resources of many individuals would be certainly larger than the limited capital of one person. Moreover, because of unlimited liability of the partners, a firm can raise greater loan since unlimited liability provides automatic security to the creditor.

4) Personal Supervision:

Partners look after the business personally. Besides, the staff can be supervised more effectively when the partners show an active interest in management. Thus, personal supervision of the partners guards against wastage.

5) Safeguard of the Interest of Minorities:

In a partnership, each partner is assured of the voice of the management of the business. No important decision can be taken without the unanimous will of all the partners. This provides protection of minority interest.

6) Brake on Hasty and Reckless Decisions:

Since responsibility and reward are linked in partnership and since liability of each partner is unlimited, partners tend to be cautious in business dealings. They adopt sound practices in the

Conduct of the business.

7) Possibilities of Growth and Expansion:

Greater resources, favorable credit standing and diversified managerial ability at the disposal of the firm enable it to grow to the fullest extent possible. But there is limit on the possibilities of growth and expansion because of limited number of the persons that can join the firm.

8) Spreading of Risk:

A partnership firm enjoys the advantages of distributed risk over the sole trading. The losses incurred by the firm are shared by all the partners and hence the burden of loss on each partner is lower as compare to sole trading.

9) Increase in Co-operation:

The success of the business of a partnership firm depends upon mutual trust and confidence. This increases the spirit

of working together. They know that a slight difference may cause to end of the partnership.

10) Flexibility:

A partnership is formed by an agreement. So the line of business can be changed easily if the need arises. In case of company, a change will require court’s sanction if the objects of the company do not permit it to engage in the proposed business.