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