The main advantage of setting up a partnership is that it allows you to share with other people the costs, risks and management burdens associated with running a business. The administration involved is also less onerous than it is for an incorporated business, and, in many cases, joining forces with a number of other founding partners also means that there is more money to invest in the start-up venture. Additionally, over time, a partnership provides the option to raise further money by introducing new partners or, indeed, ‘sleeping’ partners who contribute money to the business but who are not involved with running it.
However, a partnership arrangement also involves a number of risks. Disputes can arise in relation to how it should be managed and financed, and partners are jointly liable for any debts incurred in running the business and are not personally protected if the business fails. If one partner cannot pay their share of any debts, the others become responsible for any losses.
This may not be a big issue if you are not planning on borrowing money, incurring large overheads or making a sizeable up-front personal investment. But if the potential for running up debts is high you will need to think carefully about whether a partnership is the right legal structure.Last Updated
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Setting up and running a partnership
