What are Some of the Advantages and Disadvantages of a Partnership?
Advantages
A partnership is relatively easy to establish, but potential partners must spend time establishing the ground rules of the partnership.
Partnership profits flow directly to each partner's personal income tax return. The government does not tax the partnership as a separate entity.
With more than one owner, the partnership may have an increased ability to raise funds.
Potential employees may be attracted to the business if they are given an opportunity to become a partner.
Disadvantages
Each partner is jointly and individually liable for the actions of the other partners.
A partner must share the profits with the other partners.
As the number of partners increase, their potential for disagreements may rise since partnership decisions are made by more than one party.
Partners may not be able to deduct some employee benefit expenses from their business income on their personal income tax returns.
Sometimes the partnership may have a limited life; e.g., partners may withdraw from a partnership or a partnership might dissolve upon the death of a partner.
