Definition
According to the Partnership Act 1890,
“Partnership is a voluntary association of people (from two to twenty) which is
formed to carry on business with the view to make profit”. Partnerships are
commonly found in farming, building and in the professions like law,
accountancy etc.
Advantages
v More
capital can be raised
v Less
legal formalities. It requires a contract called ‘Partnership Deed’
v More
efficient management can be formed
v There
can be limited partners
Disadvantages
v Ordinary
partners have limited liability
v Partnerships
are usually unstable and affects continuity
v Limited
scope for expansion
Difference
between Sole Traders and Partnerships
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Sole Trader
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Partnership
Firms
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v Sole Proprietorship is a one man business
v Profits belong to the proprietor
v Losses can not be shared
v Division of labour is not possible
v It requires no agreement
v Effective control over the business
v Quick decisions can be taken
v Decisions are often hasty
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v It is owned by 2-20 partners
v Profits are shared between partners
v Losses can be shared between partners
v Division of labour is possible
v It requires an agreement /deed
v No one partner has complete control
v It takes more time to make decisions
v Decisions are more reliable
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