A partnership is a non-incorporated business that is created between two or more people. In a partnership, your financial resources are combined with those of your business partner(s), and put into the business. You and your partner(s) would then share in the profits of the business according to any legal agreement you have drawn up.
In a general partnership, each partner is jointly liable for the debts of the partnership. In a limited partnership, a person can contribute to the business without being involved in its operations. A limited liability partnership is usually only available to a group of professionals, such as lawyers, accountants or doctors.
When establishing a partnership, you should have a partnership agreement in place. This is important because it establishes the terms of the partnership and can help you avoid disputes later on. Hiring a lawyer or other legal professional to help you draw up a partnership agreement will save you time and protect your interests.
Disadvantages:
- There is no legal difference between you and your business
- Unlimited liability (if you have business debts, personal assets can be used to pay off the debt)
- Can be difficult to find a suitable partner
- Possible development of conflict between you and your partner(s)
- You are held financially responsible for business decisions made by your partner(s); for example, contracts that are broken
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