Partnerships

Advantages of a Partnership

Partnerships are relatively easy to establish. However, time should be invested in developing the partnership agreement.
With more than one owner, the ability to raise funds may be increased
Profits from the business flow directly through to the partner's personal tax returns
Prospective employees may be attracted to the business if given the incentive to become a partner
The business usually will benefit from partners who have complementary skills

Disadvantages of a Partnership

Partners are jointly and individually liable for the actions of the other partners
Profits must be shared with others
Since decisions are shared, disagreements can occur
Some employee benefits are not deductible from business income on tax returns
The partnership may have a limited life; it may end upon the withdrawal or death of a partner.
Difficult to find compatible partners
Difficult to raise additional capital
Owners’ salary/wage cannot be treated as expense; hence, not tax deductible