Article: Advantages and Disadvantages of being in a Partnership

Essay by graceneilaneHigh School, 12th gradeA+, June 2006

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The topic: Discuss the benefits and drawbacks of being in a partnership. What is needed to make them work? What weaknesses can cause a failure within the partnership? Remember to have key terms defined, issues outlined and clearly defined points of view for each side.

A partnership is a legal business structure, which is owned and operated by two to twenty people with the aim of making a profit. Partnerships have a variety of advantages and disadvantages as a business structure. Liability issues access to capital and skills make them desirable, however, if there is no agreement in these areas and no formal agreement there can be problems. Partnerships need written agreements and careful thought as to whom would be allowed to join.

Firstly, in a partnership, unlike a sole trader liability is split between each partner. Each partner also has a share of the net profit. In a partnership there is greater access to capital and skills.

More partners means more capital. The business is more likely to get a loan from the bank because there are more people to finance the loan repayments. More partners means more skills because each individual will have their own area of expertise. For example, a printer becoming involved in a partnership would have expertise in the area of graphics and presentation, which would reduce costs for advertising.

Also in a partnership the running of the business can be shared if each partner takes an active role (unless the partner is 'silent' or is a limited partnership where they contribute capital but does not actively help in the running of the business). People also have the option of forming a limited partnership where one partner has unlimited liability, which means she/he is liable for the business debt. If the business...