Starting a business with a partner can offer several benefits such as the overall responsibility of running a business, and, some will argue that, “two heads are better than one”. But partnerships can quickly turn bad if you don’t give it a considerable amount of attention and planning. Some pros and cons include:
Some possible pros:
- More capital to start with.
- Shared cost of start-up.
- Help with decision making.
- Shared responsibilities and work.
- Shared business risks and expenses.
- Complementary skills and additional contacts of each partner can lead to the achievement of greater financial results together than would be possible apart.
- Mutual support and motivation.
Some possible cons:
- Partners in a general partnership are jointly and individually liable for the business activities of the other. If anything happens, and your partner disappears, you’ll be liable for ALL the debts, not just half of them.
- Sharing profits, liability and most commonly, taxes. Each partner of a company must pay taxes separately, if business is successful with earnings above a certain amount, responsibility for a higher level of taxation will be required.
- Not having total control over the business. All decisions are shared, and differences of opinion can lead to disagreements, ending the partnership, which doesn’t always end easily.
- A friendship/relationship may not survive a partnership.
- Without the proper contracts in place, dissolving a partnership can be a long and tedious process.
Make sure you think through all of your business decisions thoroughly before making them. It is a good idea to get opinions and advise from professionals as well. For more information on our Business Law team, contact us here.