Perks and snags of small business partnerships

In a partnership, two or more people combine resources to start a business. In a partnership, the law doesn’t distinguish between the business and its owners. Partnerships can be a little complicated, because there are three different types possible – general partnerships, limited partnerships, and joint ventures.

Let’s take a look at some of the perks and snags of choosing a partnership for your company’s form of organization.

Perks of small business partnerships

  • Relatively easy to form.
  • Relatively low start-up costs.
  • Simple to start and organize.
  • Partnership agreement has most legal issues covered.
  • Having more than one owner may allow more access to funds.
  • There may be possible tax advantages.
  • It may be easy to attract employees if they’re given the incentive to become a partner.
  • Limited regulation.
  • Ability to benefit from complementary skills of partners and a broader management base.

Snags of small business partnerships

  • Each partner may be responsible for the actions of another partner.
  • Profits must be shared with other partners.
  • Unlimited liability for General Partnerships (not separate by law, can be personally liable for all debts even if it means paying debts with personal assets).
  • Control and authority over important decisions is shared.
  • Difficulty in changing ownership.
  • Disagreements among partners may occur; may take a longer time to come to a decision.
  • Difficult to find suitable partners.
  • Some employee benefits are not deductible from business income on tax returns.
  • As a partnership, the company may have a limited life if a partner withdraws or dies.
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