A business run as a partnership shares control, responsibility and finances between 2 or more people. The partners are not only responsible for managing the business, but also “jointly and severally” liable for any debts incurred by the business and the profits are shared between the partners based on pre-agreed percentages.
Below are just a few examples of the advantages and disadvantages of running a business as a partnership.
The main advantages of setting up as a Business Partnership are:
- Business partnerships are relatively easy to establish; make sure time is taken to draft a partnership agreement to avoid future problems.
- With more than one owner, it may be easier to borrow money and raise capital to invest in the business.
- The business can benefit by using the knowledge base and experience of all of the partners.
The main disadvantages of being a Business Partnership are:
- Business partners are liable for the actions of the other partners.
- Business partners, like sole traders, are liable for the actions of the business.
- Since decisions are shared, disagreements can occur and therefore the decision-making process can take longer.