Why Partnerships are Better than Sole Proprietorship

Thinking about establishing a new small business of your own? But having trouble deciding which form of ownership you should go after? Well, you have come to the right place. This post will guide you through the advantages of having a partnership business than a self proprietorship.

More Financial Resources
Financing the business is often the most thought of topic when forming a new business. Generally people have to start their business with their personal assets and small loans from banks. But if two or more persons join hands in forming a new business, it gets much easier to raise sufficient fund and it takes off huge amount of burden from one person’s personal assets. That’s why monetary benefit is the biggest reason behind forming a partnership rather than sole proprietorship. Another good thing about partnership (like sole proprietorship) is that the profit of the business is taxed only ones, as personal assets. It means that, even if you are getting more help from the partner in form of shared activities and monetary benefits, you are still being taxed like a sole proprietorship, which denotes superior value for your business.

Sharing of Management, Skills & Knowledge
It is simply much easier to manage the day-to-day activities of a business with carefully chosen partners. Partners give each other free time and provide different valuable skills and perspectives. Suppose someone wants to set-up a small computer servicing center. He has all the technical skills needed for this job. But he lacks accounting and management skills. In that case, it’s better to find a suitable partner for this job, rather than hiring an accountant. Because he can manage all the “desk activities” of the farm for free plus work hard than an employee.

People Take Partnerships More Seriously
Clients or customers prefer a partnership business more than they prefer a one-man-show. They feel that partnerships are more reliable. As far as my opinion goes, I won’t purchase a large quantity of raw materials from a sole-proprietorship business. The reason behind this, I feel that the business might close down quickly and there will be no organization to refund or compensate me if something goes wrong.

Longer Survival
Because of the 3 points mentioned above, a partnership lasts longer than sole proprietorship. A study that examined 2,000 businesses started since 1960 reported that partnerships were four times as likely to succeed as sole proprietorship. It is believed that, a businessman performs better and works in a disciplined way, if he/she is being watched by another partner.

Have you decided about which form of business ownership you want to follow? If it’s a small-medium sized business organization that has regular clients, rather than customers, my suggestion would be to go with partnership.

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