Member Article

Partnerships in business

Starting a business with a partner, or a few partners, can give you some really big advantages. A business partnership is often a powerful union between a few people that combines financial resources, business connections, customers, and many other things. But, as in all relationships, a business relationship can turn bad. When that happens, people go their separate ways. But aside from that, there are many reasons to form a business partnership.

Why should you start a business with a partner?

t is most definitely the easiest business entity to start up. When creating a partnership, you don’t have to fill out any form or apply somewhere, you just have to start a business with another person, with the intention of making a profit from that business, and you have automatically created a general partnership, without having to sign anything. One thing to note is a general partnerships is considered to be a pass through entity, which means that the partners in the business will be taxed individually. Another benefit from starting a partnership in business is that it is a great way to attract employees who may end up being beneficial for the business. When an employee sees a business that works with a partnership, they might be attracted by the thought that they might become partners in the future. But, not everything is sunshine and rainbows, and there are disadvantages in a business partnership.

One of the biggest disadvantages to having a business partnership is that a creditor is able to sue one of the partners in the business for the entire partnership debt that is owed and that that partner will be responsible for paying the entire amount to the creditor. A move that can solve this is not actually creating a partnership, but rather incorporating your business, but that comes with its advantages and disadvantages too. It is a good way of protecting your personal assets if your partner in the business gets sued.

The are two different kinds of partnerships.

A general partnership is formed when you have two or more people who agree about starting a business, together, to turn a profit. You don’t have to put it on paper, although we suggest that you do. You don’t have to file a notice either. As we said before, the big problem with such a partnership is the joint and several liability of the partners in the business. There are also limited partnerships, which are a variant to the partnership format. A limited partnership is created when there is one general partner, and one limited partner in the business. The limited partner in the business is called limited because of the limited personal liability. He can contribute money, but he doesn’t have any right to direct that money, or manage the business. The thing that also differs from the general partnership is that you’ll need to do some paper work to form this kind of partnership.

This was posted in Bdaily's Members' News section by Anne Brown .