Business Partnerships
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- Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement.
- With more than one owner, the ability to raise funds - Debt vs Equity may be increased.
- The profits from the business flow directly through to the partners' personal tax returns.
- Prospective employees may be attracted to the business if given the incentive to become a partner.
- The business usually will benefit from partners who have complementary skills.
Business Partnership Disadvantages
- Business Partners are jointly and individually liable for the actions of the other partners.
- Profits must be shared with others.
- Since decisions are shared, disagreements can occur.
- Some employee benefits are not deductible from business income on tax returns.
- The partnership may have a limited life; it may end upon the withdrawal or death of a partner.
Questions that should be decided before entering into a Partnership Agreement:
- Are Partners allowed to participate in activites in competition with the Partnership?
- For what time period is a Partner prohibited from competing after withdrawal?
- Should Partners be compensated for services in addition to share of profits?
- What is the voting percentage required to amend any part of this Agreement?
- What percent of vote is required to dissolve the Partnership?
- How will Partnership assets be distributed on Dissolution or Dissociation?
Partnerships Advantages and Disadvantages
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