Advantages of Partnership

Partnership can be defined as an agreement where two or more persons agree to share the profits of business done by them. Given below are some of the advantages which a partnership has over sole proprietorship and company –

Advantages of Partnership

1. Unlike sole proprietorship, in partnership there is more than 1 owner, which implies that starting capital is brought by more than 1 person which is a great advantage when you are first starting a business as higher the capital bigger the business and if the business is done correctly than higher will be the profits of the partners.

2. In partnership the risk is shared by all the partners equally and therefore one does not has to take that much stress as he or she would have taken if it was a sole proprietorship. So for example if business during tough times has loss of $10000 and profit sharing ratio is 1:1 than losses of partners will be $5000 and not the whole $10000.

3. A partnership has the advantage of polling of many talents of all the partners which make doing business easy as each partner can do that work in which he or she has more knowledge than others. In simple words one get the benefits of specialization as one partner may be good in marketing while other partner may be good in finance and thus both of them can carry out their ask in their field of interest making it profitable for the partnership firm as a whole

4. The borrowing capacity of the business is increased due to more people as they will have more assets which help the partners in borrowing from banks or financial institutions.

5. Apart from financial advantages partnership has emotional advantage also because during tough times your partners will be of great help which is not possible if you are doing business alone.

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