It’s not just about you anymore.
Two or more individuals forming a business partnership can seem like an ideal way to set up a business. Let’s take a look what this will mean for your business.
A business partnership is simply when two or more people combine their efforts to work together as one business. Individually the partners are usually self-employed. This creates some unique advantages and disadvantages. Let’s take a look: Advantages of a Business Partnership. Here are some of the advantages you cane expect when forming a partnership:
- Less regulation. A partnership is easier to run and is subject to less regulation than a limited company.
- Start-up Capital. With several partners funding the start of a business, a partnership can get a significant financial boost compared to a one-man start-up.
- Work to Your Strengths. It is common with two or more partners that each will have separate areas of expertise. This allows all parties to focus on their strengths.
Disadvantages of a Business Partnership. As with any business model, there are also some disadvantages:
- Unlimited Liability. Each partner is completely responsible for the liabilities of the entire partnership. If one partner disappears the other can be lumbered with the debts that person incurred. This can be avoided by forming a limited liability partnership.
- Need for Consensus. If a business is run jointly by two or more individuals, you need to reach agreement about what actions are in the best interests of the business. This might be easy now, but may be harder two years from now.
- Higher Taxes. Partners are effectively self-employed, and will be taxed more than if they were running a limited company.
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