The partnership has lots to offer when people enter into a partnership business. There are several drawbacks too.
One of the most common forms of running a business in the U.K is entering into a partnership business. It is a partnership where two or more people unite together to form a business. Undoubtedly, they do have a common business idea which they want to implement together or have realized that they can put their skills and talents to use in such a way that makes a good business team.
It is a logical option to form a partnership. Running a small business as a sole trader or a limited company on a reasonably low turnover doesn’t make any sense than to engage oneself in a partnership business which offers a good choice of legal structure of a new business. The partnership is the most lucrative form of business provided the way partners’ set-up and run in a manner that it is governed and taxed which perhaps isn’t the case.
Looking at its positivity, the partners in a business are the business owners who share the profits, the liabilities and the decision making abilities. Each of the partners has a different skill set which can be combined together for a smooth running of the business. No doubt, it presents some problems too. Like over the years, most of the partnerships have ended up drastically. Family and friends join together in one business and end up coming out on a personal or a business level which leads to a failure in business. This is one of the major drawbacks of partnerships over other business models like a sole trader or a limited company, but it’s very much important to maintain a fine balance between the advantages and disadvantages.
The partnership has lots to offer when people enter into a partnership business. The advantages are as follows:
Lack of formality is one of the main benefits of a partnership when it comes to managing a limited company. Besides the partnership requires the following:
A Partnership is much better than running a business as a sole trader as:
As the business profits are shared between the partners in a partnership, it can directly flow through the personal tax returns of the partners instead of initially being retained within the partnership.
Apart from lots of advantages partnership business offers, there are several drawbacks too. Let’s check each of them in detail:
These questions, however, creates resentment amongst partners and doesn’t permit each partner to get their fair balance between effort and reward.
In a partnership business, each partner has to share the stress and workload which in turn consumes a lot of time and energy and hampers your work/life balance, especially when you cover up another partner who doesn’t have a strong work ethic.