Business Ownership - Partnership 1.5.4

Partnership -  (Unincorporated) where two or more people share the costs, risks and responsibilities or being in a business together. The partners between them own all of the businesses assets and owe all business liabilities, therefore have unlimited liability.

The legal partnership agreement sets out how the partnership is run, covering areas such as;

1. How profits are to be shared
2. What the partners have to invest into the business
3. How decisions are taken
4. What happens if the partner dies or wishes to leave

You can also have "sleeping partners" who invest, BUT do not manage the business.

ADVANTAGES

• Business benefits from the expertise and efforts of more than one owner.
• Partners can provide specialist skills
• Greater potential to raise finance - partners each provide investment
• Risks, costs and responsibilities shared
• Financial records remain private

DISADVANTAGES

• Full personal liability - "unlimited liability"
• A poor decision by one partner damages the interests of the other partners
• Harder to raise finance than a company (Plc and Ltd)
• Complicated to sell or close
• Partners are forced to honour the decisions of other partners
• Arguments can occur with decision making
• If a partner dies, resigns or goes bankrupt, the partnership is dissolved