Partnerships

In a partnership 1-20 partners own the company. Capital is raised by the partners themselves, or from a bank loan. There is a lot of paperwork to be done by the partners, for example – Deed of Partnership, certificates, and extra correspondence. All partners have unlimited liability. If the enterprise fails, or, say, if one partner is successfully sued, then all the partners are responsible for all debts. In addition, if one partner fails to pay income tax, (for example), the other partners may have to pay it for him/her, as well as to their own. Nowadays, many partnerships are also private limited companies.

Advantages

• More capital is available than in a sole trader business.
• The workload is usually shared.
• Professional partnerships mean that certain partners can be specialists.
• More varied ideas can be aired.

Disadvantages

• There is the danger of disagreements among partners. If some of the partners are dishonest or incompetent, the others could be left with large debts and a big mess to clear up.
• Unlimited liability (see above).
• Death, retirement, etc. of any of the partners threatens to break up the business.

Examples of Partnerships

• Accountancy Firms
• Legal Firms
• Architects