Partnerships

A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

 Advantages of a partnership include that:

    two heads (or more) are better than one
    your business is easy to establish and start-up costs are low
    more capital is available for the business
    you’ll have greater borrowing capacity
    high-calibre employees can be made partners
    there is opportunity for income splitting, an advantage of particular importance due to resultant tax savings
    partners’ business affairs are private
    there is limited external regulation
    it’s easy to change your legal structure later if circumstances change.


Disadvantages of a partnership include that:

    the liability of the partners for the debts of the business is unlimited
    each partner is ‘jointly and severally’ liable for the partnership’s debts; that is, each partner is liable for their share of the partnership debts as well as being liable for all the debts
    there is a risk of disagreements and friction among partners and management
    each partner is an agent of the partnership and is liable for actions by other partners
    if partners join or leave, you will probably have to value all the partnership assets and this can be costly.