Advantages and Disadvantages of Partnerships

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What is a Partnership?

A partnership is a legally-recognized business entity comprised of two or more people. Each member of a partnership holds ownership in the business. Partnerships are often created by formal written agreements, but may also exist on less formal terms. Laws for creating a partnership may differ from state to state.

There are two basic types of partnerships: general partnerships and limited partnerships. In a general partnership, each partner is typically jointly responsible for losses and violations related to the whole partnership. In a limited partnership, general partners are still liable for everything while limited partners enjoy limited liability.

What are the Advantages and Disadvantages of Partnerships?

Depending on the business needs involved, partnerships can offer many different advantages. These include:

However, some of these characteristics of partnerships can work against certain business goals. For instance, if the parties wish the organization to extend beyond the life of a partner, then a partnership might not be the best form for the business (since the partnership will dissolve upon any partners’ death). Or, perhaps the members would like more restrictions on the way their business is controlled; in that case, they might opt for a more traditional corporation structure.

Lastly, one of the main limitations of a partnership is that they have a tendency to limit the growth of the business. This is because control is localized into only a few individuals rather than members of a board or similar corporate features. This makes them more suitable for smaller start-up ventures and temporary projects. Each partnership may provide specific terms for partners in a partnership agreement

Do I Need a Lawyer for Help with a Partnership?

Partnerships can often be very useful structures for creating a successful business. However, it is necessary to understand the ins and outs of how they work before creating one. You may wish to hire a qualified lawyer in your area if you need help with a partnership. Your attorney can guide you throughout the process, and can also represent you in court in the event that any legal disputes arise.

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Last Modified: 04-05-2017 12:06 AM PDT

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