Partnerships are sole proprietorships with two or more owners. Each of these owners or partners shall fund, ownership labor Support business through expertise or similar. They also share the company’s profits.
There are two types of partnerships.
General Partner (GP). A general partnership assumes that the business is divided equally or into documented and pre-agreed percentages.
Partnership (LP). A limited partnership can limit both control and liability to specific partners. In limited partnerships; Partners are personally liable to some extent, but only for the individual’s negligence.
Advantages of partnership
Share responsibility. There is a saying about “power in numbers” and it applies to a partnership. Instead of carrying all the burden yourself, you can share it with your partner. This gives you more access to capital in many cases.
It’s simple to get started and manage. Establishing a business partnership is relatively easy. In terms of ongoing management, you will have fewer tax forms than other business structures.
Disadvantages of partnerships:
- Personal responsibility. Taxes for partnerships do not include the separation of the individual and the business, so the owners assume more personal risk. In addition, Owners pay personal business taxes instead of business taxes; This can lead to a higher amount owed.
- Partner conflicts. In most partnerships, Both sides don’t always agree on every decision. There are many compromises, but over time this can lead to conflicts within the company with the owners. It’s important to make sure you and your partner are on the same page when you enter this agreement.
Partnerships follow the same taxation model. This means that individual partners are taxed more than the business. Taxes are based on the personal income of each owner, not the income from the business.