Partnership can be formed between individuals and/or companies, however, it is effective only when it is established properly.
If you are considering venturing into a partnership with your friends and close business partners, we Tax Ideas Accountants & Advisers are dedicated to help you in providing advice on tax and accounting needs that may concern you.
Within the business structure of partnership, all members of a partnership share responsibility, control and financial liability proportionally. They are 'jointly' liable for each other, degree of sharing the profits and debts can be allotted and determined based on pre-agreed partnership contract.
Let us outline a few simple examples of pros and cons in considering this business structure
Pros of a Partnership
- The business structure of a partnership is easy to set up, however, it is crucial to pay enough attention to details to the agreement, so that it can prevent any unnecessary disputes and confusion from happening between partners.
- As Partnership consists of more than one person within the business, which makes it easier in borrowing money for rising capital fund for investment than sole traders as a ‘one-man’ business.
- Shared knowledge and experience from each partner within a business group can boost the development of new ideas and sustain business in times of trouble or obstacle.
Cons of a Partnership
- As mentioned above, each member within a business partnership is liable for debt and action consequences that incurred and caused by other partners.
- Upon decision making, it may also take longer time to reach an agreement as different partner offers unique opinions from their own perspectives and backgrounds.
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