Partnership Firm – Need & Importance
Here We will discuss what is the need and importance of the partnership firm.
Types of Business Firm
Individuals have many firm formats to run a business under it.
For example:-
1. Sole Proprietorship Firm
2. Partnership Firm
3. Hindu Undivided Family
4. Private Limited Compay
5. Public Limited Company
The simplest form of a Business firm is the proprietorship.
But Proprietorship has a few limitations when one wants to scale the business.
Limitations of Proprietorship Firm
- One Man Invests Capital
- Undertakes the risk involved in the business
- Controls the whole affairs of the Business.
But, when a business requires huge capital, skill, and manpower. Generally proprietorship firm is not a good decision.
The second best form of a Business firm is the Partnership Firm.
Importance of the Partnership Firm
The following are the advantages of a partnership firm over a proprietorship firm.
Easy Formation:-
The Partnership firm is easy to form. There are no legal awkward low and customs to fulfill.
Even the registration of a Partnership Firm is not obligatory.
What is required is an understanding among the partners, expressing the terms, conditions and states of a business.
Even it is not necessary to have this agreement in writing.
Large Capital and Credit Resources:-
As there are several partners, the capital gathered is more as compared to the sole proprietorship.
Apart from it, the credit a partnership firm can attract is also much more.
Distribution of rights and duties:-
Division of work and specialisation increases the efficiency of the firm.
Risk Distribution:-
The Risk and losses are distributed in the several partners.
Thus Partnership firm is much better as compared to running a big business via sol-proprietorship.
Practice Questions:-
Manish is running a business of a restaurant. His recipes are popular in his city. Through social media, he became much more popular in whole country. for the time being, he wants to expand his restuarant chain in his own state. Two his own cousins wants to join his business. Both will contribute capital. One of his cousin is experta in sales and marketing. which form of business will be best for this business with minimal legal hurdles.
a) Partnership
b) Hindu undivided family
c) Pvt Ltd company
d) Proprietorship
Ans:- a)
the legal hurdles are minimum in partnership firm.
Which is the simplest type of the Business Firm
a) Partnership Firm
b) Proprietorship Firm
c) Private Ltd Co.
d) Hindu Undivided Family
Ans:- b)
The simplest form of the business is proprietorship.
Which is the second best form the Business firm :
a) Public Limited Co.
b) Private Ltd Co.
c) Partnership Firm
d) Proprietorship Firm
Ans:- c)
the legal hurdles are minimum in partnership firm.
