Merits
1 Easy formation: Although the formation of a partnership firm is not as easy as the sole proprietorship but it is much less difficult as compared to a company. The partners agree to do business together and draw up and sign the partnership agreement. After that there are no complex government laws regulating the establishment of the partnership.
2 More capital available: Unlike sole proprietorship, there are two or more partners in partnership firms. So a partnership firm does not have to rely on a single individual as the source or its funds. The added financial strength of the partners increases the
Borrowing capacity of the firm.,
3 More diverse-skills and expertise: The partnership involves more people in decision making because there are more owners. An ideal partnership brings together partners who complement each other, not partners who have the same background and experience. One partner might be a specialist in manufacturing, another in marketing, and the third partner might be an accountant Combined judgment of all these partners often leads to better decisions than otherwise.
Limitations
1 Limited capital: Since there is a limit of maximum partners (20 in non-banking firms and 10 in banking firms), the capital raising capacity of the partnership firms is limited as compared to a joint stock company.
2 Unlimited liability: The most important drawback of a partnership firm is that the liability of the partners is unlimited.
3 No public confidence: Since the accounts are not published and publicised, the firm may not be able to command confidence of the public.
