Business Partnerships

timer Asked: Jun 10th, 2014
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Question Description

Please discuss the advantages and disadvantages of forming a partnership compared to incorporating your first business venture. Your initial post must be a minimum of 300 words.

Tutor Answer

Awais A
School: UIUC

Advantages of a partnership include that:

·  two heads (or more) are better than one

·  your business is easy to establish and start-up costs are low

·  more capital is available for the business

·  you’ll have greater borrowing capacity

·  high-caliber employees can be made partners

·  there is opportunity for income splitting, an advantage of particular importance due to resultant tax savings

·  partners’ business affairs are private

·  there is limited external regulation

·  It’s easy to change your legal structure later if circumstances change.

Disadvantages of a partnership include that:

·  the liability of the partners for the debts of the business is unlimited

·  each partner is ‘jointly and severally’ liable for the partnership’s debts; that is, each partner is liable for their share of the partnership debts as well as being liable for all the debts

·  there is a risk of disagreements and friction among partners and management

·  each partner is an agent of the partnership and is liable for actions by other partners

·  if partners join or leave, you will probably have to value all the partnership assets and this can be costly.

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