A partnership firm is a closely held business. It is not required by law to share its performance and position with others. Thus, all knowledge about the firm is restricted to only the partners of the firm. Partnership is an association of two or more persons to carry on a business in the capacity of co-owners. Each such person is called a partner. All the partners share the profits and losses in proportion of their respective ownership, or as agreed between them.
Advantage 1 Ease of Formation: It is easy to form a partnership. No elaborate legal procedures are needed to bring a firm into existence. There is no need for registering a firm. Even when required, a firm can be registered quite easily. Likewise, one can close down a firm relatively easily.
Advantage 2 Financial Resources: Partners can pool their resources and expand the financial base of a firm. Creditors would be more willing to extend credit facility to a firm based on the reputation of partners and the soundness of business carried out by the partners.
Advantage 3 Talent: can be Pooled: Partners can divide work among themselves, depending on their individual skills, and talents. This helps the firm to grow quickly.
Advantage 4 Flexibility: Partners can carry out day-today activities in a flexible way. The nature and place of business can be altered at will. New partners can join a firm when required. Partners can switch gears and change hats depending on situational requirements. Capital infusion, profit sharing, pricing policies, etc., can be altered in sync with market demands. It has freedom to undertake any activities which is legally blessed.
Advantage 5 Reward for Effort: Partners can work jointly and severally for improving business and get adequately rewarded. They can oversee work from close quarters and run the show fairly independently. Since there is no separation of ownership from management, everyone can work hard, and take the firm to commanding heights.
Advantage 6 Informed, Balanced and Careful Decisions: Partners can bring their skills, knowledge, and expertise to the table. Since they are jointly held responsible for losses, they are compelled to take a careful, cautious path. They are forced to take all the necessary steps to put reckless, careless decisions to rest.
Advantage 7 Secrecy: Partners can keep business secrets close to their chest. They need not reveal them to anyone. The firm need not even get its accounts published and audited.