Are you trying to decide what structure to use for your business? If you are considering starting a partnership firm, this article will provide you with information about its advantages.
Despite the advantages and disadvantages of partnership structures, you need to realize each one has its own pros and cons. Different business structures are appropriate for different types of businesses, depending on the goals and ideas they have.
The most common business structure is a private limited company. As a result, people tend to select this business structure without much thought. Small or early-stage businesses might not be able to handle the formalities involved with private limited companies.
The benefits of partnership firms are numerous
You Can Get Started Right Away:
Unlike forming a corporation or a limited liability company, forming a partnership does not require as much formality. Just the partnership deed needs to be registered with the state, which is a simple process. However, even this is optional.
Power to make decisions:
A company’s decision-making process is one of its most important and influential factors. A partnership firm’s multiple perspectives and extensive knowledge will enable them to make effective decisions. This applies to both transactions and projects. The partners themselves may determine how to proceed.
Insoluble:
Limited companies can only be closed after one year of existence. To close your company you must meet all of the requirements during this time. This process can take up to a year. Partnerships can, however, be dissolved in a very short amount of time.
Limited Partnership: Conversion:
Just because you began as a partnership does not mean that you cannot change. There are specific procedures for converting to a private limited company or any other type of business pitch. You can convert to a private limited company if your business grows and you need the benefits of limited liability and investors.
Compliance was not achieved:
Having to deal with compliance work can be a burden when business preparation plan. You just want to get your business up and running.
There are always snags with private limited companies. A partnership eliminates these issues.
Setup is cheap:
The cost of starting your own private limited company is $15,166, plus compliance fees and auditors’ fees. Do you really want all that baggage? Instead, consider forming a limited liability company, which will cost only about $2000.
Fundraising:
A partnership can raise funds more easily than a proprietorship. Joint ventures involve multiple parties in a partnership. As for credit sanctioning, banks are also inclined to view partnerships favorably.
Responsibility and ownership:
Although ownership is shared with multiple parties, each individual partner is an owner. They manage the business and own it. All of them work towards the same goal, despite their different roles. A partnership firm’s partners share a common purpose despite their different duties. Partners can also share the burden of work among themselves. Working together tends to result in hard work.
Shared risk:
If there are risks to share, partnering makes them easier to manage. Consequently, not only is the risk equally distributed among the partners, but also the difficulty of handling it is equally distributed.
Reports or audits are not required:
Partnership firms are not required to submit annual reports by the Ministry of Corporate Affairs. The firm must comply with various compliance requirements as a Limited Liability Partnership.
These are the major advantages of a partnership firm.
The absence of statutory audits is another benefit of a partnership firm. As a result, there are no audits of accounts. In order to comply with the Income Tax Act, the same book may be required.