There is nothing more valuable in business than finding someone with whom you can work effectively and trust implicitly on critical matters. When two Michigan residents are compelled to share in the effort and energy of turning a shared dream into a business, they may choose to organize their entity as a partnership. A partnership is one of the business models that new entities can select when they form.
This post will discuss the benefits and drawbacks of the partnership model and will generally discuss the different types of partnerships that new business owners can pursue. As with all of the posts on this business law blog, readers are reminded that no legal advice is provided. Questions regarding business formation and planning should be discussed with trusted legal representatives.
The benefits of partnerships
Partnerships are relatively simple business structures. Like sole proprietorships, they are financially tied to the owners, or partners, in the businesses. Partnerships can be created by two or more individuals who must agree to how each will contribute to their shared entity.
One of the benefits of a partnership is its relative ease to start. There are fewer requirements to start a partnership than a company or corporation, and fewer hurdles for businesses to clear to open their doors.
The drawbacks of partnerships
Like sole proprietorships and as mentioned, partnerships are tied financially to their owners. That means if a partnership suffers financial losses, the owners are liable to cover the bills, losses, and other expenses incurred by the business. Additionally, internal disputes or conflicts between business partners can result in challenges and setbacks for the business.
Types of partnerships
Partnerships can range from general partnerships to limited partnerships to limited liability partnerships. Each adds restrictions to what each partner is responsible for with regard to the business, and how much liability each partner holds with regard to the actions of other partners. Before choosing a partnership structure, it is advisable for business owners to discuss their questions with trusted business law attorneys.