Setting up a business has a lot of advantages some of which include the independence of working as per your choice and convenience, along with having the freedom to make decisions for your business and the flexibility in terms of ways of working, place of working and timing of working. Having your own business is also a great opportunity to learn new skills and gain knowledge of a number of aspects related to running a business and taking it forward. Additionally, a start-up or business creates jobs and employment for others and gives you the satisfaction of helping others and contributing in a small way towards the betterment of society and the economy. And not to forget, the sense of pride and fulfillment felt upon accomplishing what you envisioned is beyond comparison.
While setting up your business it is equally important to take the time and decide what kind of business entity you wish the business to be. Choosing the business entity and structure is an important decision to be made for the business as it affects the legal liability and taxation norms applicable for the business and in turn decides the future success of the business. Also, in case if you wish to sell off the business or close it in the future, the type of business entity affects the subsequent decision and fate. That is why deciding the appropriate business structure for your enterprise is vital.
There are various business entities to choose from such as sole proprietorship, company, corporation, LLP and partnership. Each has its own pros and cons but most businesses choose to opt for partnership registration procedure owing to its advantages to the business.
An organization where two or more individuals or organizations conduct the business together on mutually agreed terms and conditions is termed as a partnership. There is joint ownership of the business in a partnership where the profits and losses are shared and the partners have equal rights in the management of the business.
Key Advantages of Partnership Firms
- Easy to Form
A partnership firm can be formed by entering into a partnership deed, which means it can start on the day the deed is signed unlike other forms of business entities (Company, LLP) which take a few days to incorporate.
- Aids Fast Decisions
Decision making is a crucial step in any kind of business and this process is carried out faster in partnerships as there is no need for the passing of resolutions and its approval as in the case of companies. Partners have a number of powers and can take decisions and carry out transactions easily and swiftly on behalf of the firm, with the consent of other partners.
- Access to Larger Resources
A partnership consists of more number of people so the firm has access to a larger amount of resources as compared to a proprietorship concern.
- Easy to Raise Funds
Partnership firms can raise funds more easily as compared to proprietorship. Since there are multiple partners, even if each makes a contribution it is feasible for them to raise funds. Also, when seeking funds or looking for sanctioning of credit facilities from banks, partnership firms are viewed as more favorable by the banks as compared to proprietorship firms.
- Sense of Ownership
The partners in a partnership firm are united in a cause and even though they might be handling different tasks of varied natures and different duties, they each feel a sense of ownership and thus a sense of accountability which has been found to increase diligence at work.
- Aids Better Management
The partners of a partnership firm are invested in the business in terms of ownership, profit, and control and thus take a greater interest in the running of the business, especially the day to day activities and ensure that the business is well managed.
- Risk is Shared
As compared to a proprietorship where a single person handles the risk, in a partnership firm all the partners are equally responsible and all of them share the risk.
These benefits might take you to the next question regarding the partnership registration procedure (For Maharashtra only) which is quite easy and can you can learn about it further by contacting deAsra for guidance and related queries.