Partnerships
As you would expect, a partnership is a company owned by more than one person – usually between 2-20. It is often found in professions such as law, accountancy, medicine etc. Owners put money into the business and share the profits.
Partnerships are also simple to set up, but the partners should produce a document called a Partnership Agreement which outlines how much money the owners will invest in the business and what percentage of the profits they will receive as well as outlining their responsibilities and how to terminate the partnership.
If the partnership does not have a partnership agreement, any profits are distributed equally according to the Partnerships Act 1890.
Advantages
There are clear benefits to having more than one person running the business. The work can be shared and partners have the opportunity to specialise in different areas within the business. Also, there may be more capital to start the business.
Disadvantages
There are disadvantages of course. The partners may disagree and the profits need to be shared. Partnerships also have unlimited liability which means that, just as with sole traders, they are personally liable for any debts.
Consider why businesses would want to be a partnership rather than a sole trader. Share your ideas with a friend.