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Class : 11
Unit : Business

Explain the merits/advantages of partnership firm.

Ans : The merits of partnership firm are explained below: i) Easy to establish:- On the basis of agreement of two or more persons, it can be easily established by investing their joint capital. For the establishment of partnership firm, generally application form, partnership deed and bank voucher of registration fee should be submitted in the department of commerce or industry within the six month. ii) Secrecy:- In partnership firm, all internal matters related to plans, policies, and financial statement remain secret among the partners. There is no legal obligation of the partnership firm to publish it’s financial statement. In competitive business environment, secrecy is essential for business success. iii) Effective management:- The work and responsibilities of partnership firm are divided among the partners. Different partners are allocated different work of responsibility. This helps to brings effectiveness in the management of the business of an organization. iv) Flexibility:- Partners can expand business activities from small scale to large scale on the basis of profitability. Similarly,, it can minimize business activities to small scale when any kind of problem is seen in business without going through any legal procedures. v) Facility of loan:- In partnership firm partners performs large scale business with sufficient capital and earn certain goodwill and reputation in the market. As such, it becomes easy to obtain loan from bank and other financial institutions for expansion of business. vi) Prompt decision:- As the partners are directly involved in business activity, they are readily available for decision making. Because of this, partnership firm has higher chances of getting the prompt decision. This could be much more beneficial for the emergency situation. vii) Equal right for Partners:- The concept of minority and majority is not allowed in partnership. All the partners have equal rights to participate in decision making and involve in business activity. The concept of share is applied only in profit distribution. viii) Easy to dissolve:- A partnership firm can be dissolved easily. It can be dissolved after making the agreement between partners regarding the dissolution of a business. For the dissolution of the firm, only submission of an application in the concerned department is sufficient.