Trying to decide which structure to use for your business? This article will provide you with information about the advantages of a partnership firm if you are considering one.
You must understand that although partnership structures are great, they each have pros and cons. Depending on the goals and ideas people have for their business, different business structures will be appropriate for them.
A private limited company is the most common business structure. People thus choose this business type without doing much research. There are a lot of formalities associated with private limited companies, which might not be suitable for some small or affordable business plan.
Partnership firms have a number of advantages
- 1 Partnership firms have a number of advantages
Getting Started Is Easy:
As opposed to forming a corporation or limited liability company, forming a partnership does not require as many formalities. It just needs the partnership deed, which is a simple day’s work that can be registered with the state, but even this is optional.
An organization’s decision-making process is among its most important and powerful aspects. A partnership firm can make very effective decisions with multiple perspectives and extensive knowledge. These decisions apply to transactions as well. The partner can make the decision on his or her behalf.
It is only possible to close a limited company after it has been in existence for a full year. During this time, you must comply with all of the requirements. Closing a company then takes over a year. The dissolution of a partnership, however, can be completed very quickly.
Private Limited: Conversion:
Having started out as a partnership does not mean you can’t change. Conversion to a private limited company or any other type of business pitch requires specific procedures. So, if your business grows and you need the advantages of limited liability and investors, you can convert to a private limited company.
Compliance not achieved:
When starting a Business Plan preparation, you do not want to be burdened with compliance work. You just want to get things done. Private limited companies always get in the way (unless you hire someone to handle this for you). With a partnership, you don’t have to deal with these issues.
Setup is cheap:
You will need to pay $15,166 to start your own private limited company, plus compliance fees and auditors’ fees. Are you sure you want all that baggage? Consider forming an LLC instead, which will cost you only about $2000.
In comparison to a proprietorship firm, partnership firms can raise funds easily. A partnership is a joint venture between multiple parties. Also, banks are also inclined to view partnerships favorably when it comes to credit sanctioning.
Accountability and Ownership:
Each individual partner is an owner, despite sharing ownership with multiple parties. He or she owns the company and manages its operations. Although they all have different roles, they are all working towards the same goal. Despite their different duties, partners in a partnership firm are united by a common purpose. The owners can also share the burden of work among one another. People who work together tend to work diligently.
Partnering makes it easier to share risks, if any. As a result, not only is the risk evenly distributed among partners, but also the difficulty of handling it becomes equally distributed.
No annual reports or statutory audits:
The Ministry of Corporate Affairs does not require partnership firms to submit annual reports. As a Limited Liability Partnership, the firm must comply with various compliance requirements.
A partnership firm has these major advantages.
Another benefit of a partnership firm is that statutory audits are not required. Thus, no account audit is required. The Income Tax Department could require the same book to meet the requirements of the Income Tax Act.