Partnership why

The basic varieties of partnerships can be found throughout common law jurisdictions, such as the United States, the UK, and the Commonwealth nations. There are, however, differences in the laws governing them in each jurisdiction. The U. However, every state except Louisiana has adopted one form or another of the Uniform Partnership Act ; so, the laws are similar from state to state. The standard version of the act defines the partnership as a separate legal entity from its partners, which is a departure from the previous legal treatment of partnerships.

Other common law jurisdictions, including England, do not consider partnerships to be independent legal entities. A partnership is a way of structuring a business that involves two or more individuals the partners. It involves a contractual agreement the partnership agreement between all of the partners that set the terms and conditions of their business relationship, including the distribution of ownership, responsibilities, and profits and losses.

Partnerships outline and clearly define a business relationship and responsibility. Unlike LLCs or corporations, however, partners are personally held liable for any business debts of the partnership, which means that creditors or other claimants can go after the partners' personal assets. Because of this, individuals who wish to form a partnership should be extremely selective when choosing partners.

Partnerships have several benefits. They are often easier to set up than LLCs or corporations and do not involve a formal incorporation process through a government. This has the added benefit of not being subject to the same rules and regulations that apply to corporations and LLCs.

Partnerships also tend to be more tax-friendly. In limited partnerships LPs , there are general partners who maintain operations of the firm and have full liability, whereas limited silent partners, who are often passive investors or otherwise not involved in day-to-day operations, enjoy limited liability.

In an LLP, partners are not exempt from liability for the debts of the partnership, but they may be exempt from liability for actions of other partners. The partnership itself does not pay business taxes. Instead, taxes are passed through to the individual partners to file on their own tax returns, often via a Schedule K. Partnerships are often best for a group of professionals in the same line of work where each partner has an active role in running the business.

Small Business Administration. Utah Department of Commerce. Uniform Law Commission. Accessed Sept. Thompson Reuters Practical Law. Internal Revenue Service. Business Essentials. For partnerships, your legal name is the name given in your partnership agreement or the last names of the partners. Once your business is registered, you must obtain business licenses and permits. Regulations vary by industry, state and locality. If you are hiring employees, read more about federal and state regulations for employers.

Most businesses will need to register with the IRS, register with state and local revenue agencies, and obtain a tax ID number or permit. Leverage internal communication and collaboration channels when working on partnerships within your organization. For external partnerships, in-person meetings can go a long way in developing a solid working rapport.

Open and effective channels of communication between members of the partnership or alliance will ensure there are no misaligned expectations between parties. Big breakthroughs and progress can't happen in silos. Working collaboratively with partners — within an organization as well as within your ecosystem to solve business problems — generates the kind of energy that fuels growth, innovation and creativity.

Developing value-aligned partnerships that focus on common goals and complementary strengths is key to ensuring successful outcomes for all. Executives, educators and human resources experts contribute to the ongoing Leadership Lab series. Follow us on Twitter: globeandmail Opens in a new window. Report an error. Editorial code of conduct. Skip to main content. Special to The Globe and Mail. Follow us on Twitter: globeandmail Opens in a new window Report an error Editorial code of conduct.

August 06, If you're considering a business partnership as a way to grow your company, you may want to weigh the advantages and disadvantages of a partnership. A business partnership may be one of the paths you've considered to help grow your business or to answer your current business needs.

Becoming aware of the advantages and disadvantages of a business partnership is a crucial first step if you're thinking of venturing into a partnership.

The following pointers might provide some useful insights into the advantages and disadvantages of a partnership. To do a thorough analysis of the advantages and disadvantages of a partnership, start by looking at all the possible advantages that might apply to your situation. A partnership may offer many benefits for your particular business. Partnering with someone can give you access to a wider range of expertise for different parts of your business.

A good partner may also bring knowledge and experience you may be lacking, or complementary skills to help you grow the business. For example, you may be great at generating new ideas, but not so good at selling your ideas. You may be a technology whiz but a fish out of water when it comes to building relationships and taking care of the operations side.

That's where a partner with skill and acumen can step in and fill those gaps. This may be one of your first considerations when you examine the advantages and disadvantages of a partnership.

A prospective partner can bring an infusion of cash into the business. The person may also have more strategic connections than you do. This may help your company attract potential investors and raise more capital to grow your business. The right business partner may also enhance your ability to borrow money to finance the growth of the business.

It helps to keep these money issues in mind as part of the criteria in evaluating a potential partner. Having a business partner can allow you to share the financial burden for expenses and capital expenditures needed to run the business. This could result in more substantial savings than by going it alone. One of the advantages of having a business partner is sharing the labor. Having a partner may not only make you more productive, but it may afford you the ease and flexibility to pursue more business opportunities.

It might even eliminate the downside of opportunity costs. Opportunity costs are potential advantages or business opportunities that you may be forced to let go while you pursue other avenues. After all, as a one-person band, you have to decide where you choose to focus your time and talents. A partner who shares in the labor may free up time to explore more opportunities that come your way.