Partnership Firm Benefits and Advantages

Let’s Understand Benefits or Advantage of Partnership Firm in Details for Small Business.
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Benefits and Advantages of Partnership Firm

Minimum 2 people can incorporate a partnership firm, the process of incorporation is very easy and simple and Partnership Act, 1932 govern partnership firm. Its registration is optional in some states of India, where some states require registration of Partnership Firm. It can be incorporated by a Partnership Deed. There are many benefits of the Partnership firm. Some of the interest is mention below :

Easy Formation

It was very easy to form any partnership firm. Like LLP and other corporate business, it does not require much legal formality during incorporation of partnership firm.  It is not necessary to get the firm registered. To start a partnership firm, you need to do a deed that can be oral or written. There are few states of India which makes mandatory for registration of Partnership Firm. In some states registration is not required; you have to only do a partnership Deed.

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Larger Resources

Due to the more number of members, the partnership firm has larger resources for the business operations as compared to the sole proprietorship. As there are multiple partners in a partnership firm, they can use their knowledge and experience to expand their partnership business.

Sharing of Risk

One of the most significant advantages of the partnership firm is that the risk gets equalized in all the partners. As there are multiple partners in a partnership, so the risk gets balanced.

No Annual Returns

There is no need to submit an annual return to the Ministry of Corporate Affairs. If we compare partnership firm with Limited Liability Partnership, then we do not have to file an annual return in the Partnership firm to the ministry of Corporate Affairs, while we have to fulfill many compliance in the Limited Liability Partnership.

Higher Contribution of Capital

A partnership firm can raise the higher contribution of capital because of its higher number of partners. It can raise contribution easily because there are multiple partners available for donation. Multiple partners can also get various loans from the bank so it will help you in many ways.

No Statuary Audit

One of the significant advantages of a Partnership firm is, there is no requirement of Statuary Audit. Therefore a Partnership Firm is not required to get its books of account audited. You may have to check your book of mind if there is any requirement of Income Tax Act. Sometimes it is required by the Income Tax Department.

Winding Up

In a partnership firm, it is very simple to winding up of Partnership Firm. Partners of Partnership Firm can enter into a dissolution deed anytime, or they can also make a clause of winding up in Partnership deed so it will wind up accordingly. In a partnership firm, there is a decidedly less legal process for winding up.

Flexibility in Operation

One of the benefits of the Partnership firm is that it is a bit flexible because you do not have to complete much legal formality until it is completed from its beginning. Operation of Partnership would be very flexible as the partner can increase or decrease the area of their business without any legal formality. The owners of the partnership firm are partners, so it is easy for them to take any decision. Decision making in partnership is easy as compared to other corporate entity.

Can File a Case Against The 3rd Party

A Partnership firm can bring third parties to the court for resolution of disputes arose during business and in fact of any other matter relating to the partnership firm. An unregistered Partnership firm loses the right file the case against the third party for resolution of their disputes until and unless the procedure of Deed Registration has been completed. 3rd party can also sue the Partnership firm.


As you can see that Partnership firm can be incorporate by minimum two people by partnership deep and it has many benefits. As some of the interest is mentioned above. If you are planning a startup, then you should consider a partnership firm because its incorporation is very easy and it has less legal requirement so it will give benefit to you. From its incorporation to its winding up, all process of partnership firm is easy and simple. You must give it a thought.