If you’re considering launching a business with one or more other people, a partnership might be a legal business structure that you’re considering. Find out what partnerships are in business, and the pros and cons of setting up your small business as a partnership.
What is a Partnership?
A partnership is a business structure where two or more individuals own and operate a business together, where the owners share the profit, loss, and duties of running the business. They’re commonly used by professional service providers such as lawyers and accountants.
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Pros of Partnerships
- Partnerships are easier to set up than corporations.
- Partnerships are less expensive to set up than corporations.
- The owners don’t have to run the business entirely on their own.
- Partnerships don’t pay taxes as a business (pass-through taxation).
Cons of Partnerships
- Owners have to share profits with partners.
- Owners are personally liable for the debt incurred by the partnership.
- No owner has full control over the decision-making process.
- If a partner passes away, the partnership dissolves and a new partnership would have to be formed with the remaining owners.