Advantages and Disadvantages of a Business Partnership

Partnerships are one of the three main categories that all businesses in the United States fall under (the other two being corporations and sole proprietorships). A partnership is any business in which two or more individuals share in the profits and losses of the business. Like the other two types of businesses, partnerships have their own unique advantages and disadvantages.

Advantages

There are a whole host of advantages that a partnership can enjoy. These include, but are not limited to, the following:

• Partnerships benefit from the capital of multiple owners, who can in total invest more than if there were only one owner.
• The workload of running and operating the business is shared.
• It is generally easier for a partnership to raise additional capital than it is for a sole proprietorship.
• By offering individuals an opportunity to become a partner, partnerships can attract strong talent.
• Unlike corporations, partnerships are not taxed like a separate entity. As a result, the owners generally only have to pay income tax.

Disadvantages

Unsurprisingly, partnerships also have disadvantages. These include, but are not limited to, the following:

• The owners of the partnership have to share profits. No one owner can take all of the profits of the business.
• If one partner performs poorly, the entire business can suffer, affecting how other partners do and how much profit they earn.
• The partners of a business are personally liable for any problems that may occur. That is, if the business is sued, then the partners’ personal finances can suffer also.

Contact Us

If you are considering forming a partnership, it is important that you follow the appropriate legal procedures. To learn more about how to meet the legal requirements of starting a partnership, or a corporation or sole proprietorship, contact the Austin business lawyers of Slater Kennon & Jameson, LLP by calling 512-472-2431.