Starting up your own business is exciting and exhilarating! It can also be equally as challenging, with a lot of speed bumps, if you are not prepared. That’s why, before you start a business you should decide on the most suitable business structure to operate under. Whether you are a sole trader, or involved in a partnership or company, each structure has its own sets of advantages and disadvantages. It is crucial that you consider the specific requirements of your business before deciding.
What Is A Partnership?
A partnership is made up of two (2) or more parties, who distribute income or losses between themselves.
There are three (3) types off business partnerships, including;
- General Partnerships
- Joint Ventures
- Limited partnerships
General partnerships are the most common and involves thee businesses management responsibilities, liability and any profits are divided among all partners as per the written agreement. A limited partnership sees each partner’s input and liability based on the percentage of their investment in the business. Given the nature off this partnership, it is best suited to short-term agreements. Lastly, joint ventures are essentially a short-term general partnership which has an agreed start and end date.
Below are five (5) benefits of a partnership business structure:
1. Share profit and losses with your business partners.
2. Share control and manage your business with your business partners.
3. Having access to your business partners range of skill, knowledge, and resources.
4. Getting new perspective, moral support and new business opportunities from your business partners.
5. Share financial costs and financial burdens with your business partners.
Drawbacks Of A Partnership
Below are five (5) drawbacks of a Partnership business structure:
1.You don’t have full control of your business.
2. You could be liable for the actions or negligence of other partners in business operations.
3. Potential for you to be liable for other partners’ share of the partnership debt.
4. Having disagreements between partners which may lead to problems and risks to the business.
5. Instability issues if a partner leaves or join your business.
It is a good idea to invest in a lawyer to put together a Partnership Agreement. A lawyer is a one-off cost assisting to save you from disputes and liability in the long term. If you have legal inquiries relating to partnership agreement or other general commercial law matters, you can contact Longton Legal’s Melbourne Office via its office number, 03 9670 1199.
*Disclaimer：This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*
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