What are the drawbacks of a partnership?

You may be an entrepreneur considering starting a new business. If so, how do you know who you could trust as your potential partner? If are unsure, here are some of the disadvantages of creating a partnership in your new business venture.

A business partnership is almost like a marriage. You spend days and nights together, working to make the business a success. In a partnership, it can be several people involved with the business and you each own part of the business. There are several different types of partnerships. The first is called a general partnership. As a general partner, you share responsibility for what happens to the business. If one is sued, you all are responsible. The next is called a limited partnership. In this role, your partner is more of an investor than one who participates in the everyday business. The other type of business is called a limited liability partnership (LLP). In this partnership all partners have limited liability from incompetence or errors committed by the other partners or employees.

Disadvantages of a partnership

As with anything, there are pros and cons to any business. Some of the disadvantages include:

  • You will not know who is in charge- you lose control of your business if you take on a partner. There will be two people making the decisions.
  • You will also share any losses- as with any potential assets, you also share losses and are both responsible for any debts. Even if your partner is the one who created the debt, you both are liable.
  • Your relationship with your partner can sour- first, things may be going well but a disagreement or other business conflicts can come into play.   
  • There may be unpredictability- a change triggered by a partner’s situation can cause instability in the business.

If you are considering starting your own business, it is good to be aware of the possible drawbacks of starting your business. If you have any questions, a business law attorney may be able to answer them for you.

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