There are a number of options for the ownership of a business. Each ownership type has its own advantages and disadvantages and a business should choose the one that best suits its needs.
A partnership is a type of business that has between 2 and 20 owners. They decide to set up and run a business between them.
Partnerships are often found in businesses that provide a professional service, such as lawyers, doctors and accountancy practices. They can sometimes be identified by the name of the business. For example, ‘Kowalski & Davies Accountancy’ would probably be an accountancy business with two partners with the surnames Kowalski and Davies.
In a partnership, the owners agree a set of rules. These are outlined in a document called a deed of partnership A document that is signed by all of the owners of a business setting out the terms they must abide by and their obligations as owners.. As an example, this document may specify how profitsThe amount of money made after all costs are deducted. are allocated, what percentage of the business each person owns, their roles and responsibilities, and the percentage of any business debts that each person would have to pay. The owners in a partnership pay income taxTax that someone pays based on their personal income (the money that they earn). on their earnings.
Some advantages of a partnership
it is usually quick and easy to set up
there is shared decision-making by the owners
there is shared responsibility for debt by the owners
partners bring more skills and ideas
there is more capital available to invest
Some disadvantages of a partnership
it can involve long work hours
profits have to be shared between the partners
conflict amongst owners can occur
there is the risk of Unlimited liability When the business owner or owners are personally responsible for all the debt of the business, no matter what the value.
one partner may let the others down by not upholding their responsibilities in the business
