Tuesday, 28 September 2021

What are the advantages and the disadvantages of partnership business?

 Are you planning to start a business with one of your friend or relative? This kind of business where there are two or more owners comes under the category of partnership businesses.

Partnership is a type of business model where the organization gets operated by two or more partners and business gets owned by more than one owners.

Partnership is also a kind of marriage where the partners will need to manage their professional life and the organization together. There are four types of partnership. These are:

General partnership

It is the most simple and basic type of partnership business where two or more partners decides to work together for a business just by signing the partnership agreement. In this type of partnership business, all the partners are having equal liability and they all are responsible for all the profit as well as loss in the business.

Limited partnership

This type of partnership businesses are registered type business authorized by the states. In this partnership business, one of the partner is active partner who is solely responsible for all the operation in the business while the other partners only invest money but do not participate in the  business activities actively.

In this partnership business type, the limited or the silent partner invests only for the returns and they cannot lose more than their investment. The limited partner in this type of partnerships are not responsible for any kind of debt or the liabilities.

Limited liability partnership

It is more similar to the general partnership business where all the partners actively participate in the business activities, but here in this partnership business, the liability will be limited for one other’s action.

In this business type, the partners will be liable for bearing all the debts and losses in the business, but will not be liable for bearing the errors by any of the partner.

Limited liability and limited partnership

It is a new pattern of partnership business where one active partner will manage all the business activities, but will be having limited liabilities. This is kind of limited partnership where all the partners will be having the responsibility of the liability protection.

These are some types of partnership. Before entering in the partnership, it is advised to learn the advantages and the disadvantages before entering the partnership business. Following we are listing some general pros and cons of the partnership business.

Advantages of partnership business

Following are some cons of entering the partnership business:

Extra sets of hands

Yes, this is one of the major benefit of partnership business. In the partnership business, you will get an partner to work with and to make effort with in order to promote the business. All the business activity will not be only on the single owner.

In businesses, a single owners requires to juggle with multiple tasks and they need to tackle the constant busyness, smoldering problems, and late night works. But having a business partner will help you divide all the business operations and thus more time for yourself.

Having a business market means having a set of hand with whom the business work can be divided. This will help the business work to be done faster and more time for personal lives.

Benefit from extra sets of skills

More the partners means more sets of skills. Each of the partner is having some special skills and thus can contribute in the promotion and the growth of the business. For example, if you are good in promotion and marketing, but having less knowledge related to products and service. Finding a partner with good knowledge of products and service will help you run the business successfully. Your partner will manage the products and services and you will manage the marketing and promotion work and thus get better outcomes from the business.

Less financial burden

It is one of the major benefit of the partnership business. Even in the case of loss, you are not the only person liable for the losses. All the losses will be divided in all the partners and thus the financial burden on single owner will be reduced.

Less paperwork

In order to enter the partnership, you will not require to done with lots of paperwork. A simple partnership agreement with signs from all the partners will allow you to start your business.

Less tax forms

In partnership business, there is no such extra business entity tax. All the partners will need to fill their individual tax depending on the income from the partnership business.

Disadvantages of partnership business

Here are some of the cons of partnership business:

No personal decisions for the business

Since the business will be operated by more than two partners, the decision for the business will also be taken by all the partners. You individually cannot take any action for the business without confirmation from other partners.


When in a partnership, you might be required to tackle with several disagreements with the partners. Sometimes, many partners might need to face major conflict in the workplace and you all might get sick of working together.

Splitting of the profit

No matter who works more, who works less, the profit in the end will be splited equally among all the partners. Even if you contributed more in the growth of the company, still all the partners are going to have the same profit share.

Individual Tax

Taxed individually is no doubt a pro, but is con at the same time. Business tax is comparatively low. Combined tax paid by all the partners might be more then the business tax.

The bottom line

So these are some advantages and disadvantages related to the partnership business!



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