In this blog we are talking about unincorporated partnerships. Check our other blogs for other forms of corporate partnerships, limited partnerships and more. A partnership is established when two or more people agree to pool their financial, managerial, technical and other resources in order to operate a business for profit. Like a sole proprietorship, a partnership is not taxed as a business that is separate from its owners. The income from the partnership is included as part of the partners’ personal incomes and taxed accordingly.
The main advantages of partnerships are:
Ø Because two or more people will be in business together, they can combine their finances in order to invest more than either could have done individually.
Ø A partnership will most likely be able to borrow more than a sole proprietorship because creditors will have the credit & collateral of two or more people instead of only one to secure their lending.
Ø Partners can pool talents and resources to accomplish more.
The main disadvantages of partnerships are:
Ø Like a sole proprietorship, partners in a partnership are also exposed to unlimited liability incurred by the business, in relation to their % of ownership.
Ø The partnership ends every time a partner leaves, unless provided for in a partnership agreement.
Ø Start-up costs can be as high as, or even higher than, the cost of incorporating, due to the cost of Partnership Agreements.
If you are considering a partnership you may not want to use this typical form of partnership, but instead consider using a corporation or limited partnership. Please contact us if you require more information on business structuring or partnerships.
No comments:
Post a Comment
Thank you for your comment!