What are the advantages and disadvantages of partnership?

Answer 1

Some advantages are:

• Partnerships are relatively easy to establish.

• With more than one owner, the ability to raise funds may be increased, both because two or more partners may be able to contribute more funds and because their borrowing capacity may be greater.

• Prospective employees may be attracted to the business if given the incentive to become a partner.

• A partnership may benefit from the combination of complimentary skills of two or more people. There is a wider pool of knowledge, skills and contacts.

• Partnerships can be cost-effective as each partner specializes in certain aspects of their business.

• Partnerships provide moral support and will allow for more creative brainstorming.

Some disadvantages are:

• Business partners are jointly and individually liable for the actions of the other partners.

• Profits must be shared with others. You have to decide on how you value each other's time and skills. What happens if one partner can put in less time due to personal circumstances?

• Since decisions are shared, disagreements can occur. A partnership is for the long term, and expectations and situations can change, which can lead to dramatic and traumatic split ups.

• The partnership may have a limited life; it may end upon the withdrawal or death of a partner.

• A partnership usually has limitations that keep it from becoming a large business.

• You have to consult your partner and negotiate more as you cannot make decisions by yourself. You therefore need to be more flexible.

• A major disadvantage of a partnership is unlimited liability. General partners are liable without limit for all debts contracted and errors made by the partnership. For example, if you own only 1 percent of the partnership and the business fails, you will be called upon to pay 1 percent of the bills and the other partners will be assessed their 99 percent. However, if your partners cannot pay, you may be called upon to pay all the debts even if you must sell off all your possessions to do so. This makes partnerships too risky for most situations. The answer would be a different business structure.

Answer 2

Some advantages are:

• Partnerships are relatively easy to establish.

• With more than one owner, the ability to raise funds may be increased, both because two or more partners may be able to contribute more funds and because their borrowing capacity may be greater.

• Prospective employees may be attracted to the business if given the incentive to become a partner.

• A partnership may benefit from the combination of complimentary skills of two or more people. There is a wider pool of knowledge, skills and contacts.

• Partnerships can be cost-effective as each partner specializes in certain aspects of their business.

• Partnerships provide moral support and will allow for more creative brainstorming.

Some disadvantages are:

• Business partners are jointly and individually liable for the actions of the other partners.

• Profits must be shared with others. You have to decide on how you value each other's time and skills. What happens if one partner can put in less time due to personal circumstances?

• Since decisions are shared, disagreements can occur. A partnership is for the long term, and expectations and situations can change, which can lead to dramatic and traumatic split ups.

• The partnership may have a limited life; it may end upon the withdrawal or death of a partner.

• A partnership usually has limitations that keep it from becoming a large business.

• You have to consult your partner and negotiate more as you cannot make decisions by yourself. You therefore need to be more flexible.

• A major disadvantage of a partnership is unlimited liability. General partners are liable without limit for all debts contracted and errors made by the partnership. For example, if you own only 1 percent of the partnership and the business fails, you will be called upon to pay 1 percent of the bills and the other partners will be assessed their 99 percent. However, if your partners cannot pay, you may be called upon to pay all the debts even if you must sell off all your possessions to do so. This makes partnerships too risky for most situations. The answer would be a different business structure.