The Partnership firm is the one that entails partnership between two individuals that undertake business for profit reason. There is no need to incorporate this form of business entity and there is no need to have a structure associated with it.
When it comes to India , one of its most popular firms that has come up with the Partnership firm. It is a form of business entity where two individual partners up and join forces to conduct a business for the purposes of profit.
However, just as it is with every sort of business entity, there are advantages and there are drawbacks that are associated with this particular form of business entity and they are as follows:
Benefits Associated with a Partnership Firm Registration:-
The benefits that are associated with a partnership firm are as follows:
- This sort of business entity is easy to start-
Among all the business entities that are present in India, this is the sort of firm that is easiest to start. The only requirement for the incorporation process for this firm is that the need of a partnership deed. With this requirement, it can be incorporated and start within the same day. When you compare this kind of firm with the Limited Liability Partnership you would note that compared to 10-15 day registration process of LLP, this is just one day.
- There is no need to pass resolutions-
When it comes to any sort of business, the most amount of time it takes to start a process is with the decision process. The reason for this is to need to pass the resolution. However, this is one thing that the partnership firm does not need to partake in. to that end the decision process is fast and is reliable.
- Raising Funds-
It is far easier for a partnership firm to raise funds when you compare it to the Proprietorship firm. As there are multiple partners to contribute money. Furthermore, when it comes to loan, it is easy for a partnership firm to access it as the banks favours this lot more.
- Equal sense of belonging-
Each partner in a partnership firm has a sense of belonging. They both can manage and indulge with many activities within the company. However, there cause is also common one. With ownership, what you have is a higher sense of accountability. The more accountable that partners feel, the better is there performance.
However, all is not green in the world of Partnership for there are certain drawbacks to this a well:
Drawbacks associated with partnership Firm Registration
The drawbacks that are associated wit this sort of firm are as follows:
1. The Liability is unlimited-
When the firm suffers a loss, then each and every partner associated has to bear them. Furthermore, the liability that one partner creates happen to be same for the other partner as well. In order to quell this liability, LLP came into existence.
2. The Number of Members is low-
When it comes to the numbers of members, that are allowed in such a firm, the number is limited to 20. To that end, the LLP makes for a much better option in this regard.
3. There is no central figure-
While this is commendable that this form of business entity tries to take a lot more attentions into its account. The lack of the central figures when it comes to the operations can make the entire endeavour a bit directionless. Furthermore, there can also be a discrepancy as to how much power is given to the Partners. There are times when one partner has more power than the others and this can turn things ugly as well.
4. The public finds it hard to trust a Partnership Firm-
When it comes to the matters of trust, you should know that a Partnership Firm does not require any sort of Registration done. To that end, there is no need to have structure of this firm. Now, for something which appears to be directionless, it is quite hard to gather the trust from anyone, let alone the public.
5. it can be dissolved abruptly-
When there is a certain case of “death” of one of the partners of the firm, it resukts in the complete dissolution of the firm. This sudden tend to end the business of the firm. With protection against dissolution, LLP has become a more desirable option as the death of the partner does not lead to any such disruptions to operations.
Conclusion-
There are both ups and down when it comes to a Partnership Firm. However, some of its benefits and disadvantages come with any form of business entity. While the lack o a central figure and lack of limited liability is quite obvious, there is a sense of freedom associated with such a company that still makes it alluring to traders.
BIATConsultant is leading consultant for partnership firm registration online in India .