Partnerships do offer, as marriages, quite a few advantages. Very first of all partners have much of flexibility. They may perhaps define their relationship in any manner they choose. The partnership agreement worked out consists of any information agreed upon by the partners regarding difficulties like capital contributions, duties being performed, and provisions regarding a partner's leaving the business. Yet, as with marriages, you will discover potential risks associated having a partnership. The partnership mirrors the sole proprietorship in that all of the partners have an unlimited liability in which firm obligations are concerned. Further, just like a marriage, all partners are responsible for ones debts the business accrues, even if they resulted from the unauthorized actions of an additional partner. Adding to these drawbacks, the integrity of one's partner's is really a key point in achievement and a relationship must be entered only when thoroughly familiar with all other partners. The old joke about partnerships demonstrates the capability risks, "I formed a partnership with my finest friend who supplied the experience and I supplied the money. True enough, 1 year later he had all of the income and I had all the experience." However, for some kinds of businesses, partnerships do jobs well, but they are being a dying breed of firm formation for all but several ventures, "Because with the high risk resulting from this debt rule, partnerships, which have been quite common.
The Wall Street Journal isn't as subtle in its advice with regards to partnerships, which appears to bode even less well for their popularity in future, "Fifty-fifty partnerships don't work. Just do not do it," (Lord 87). In thinking the partnership, one need to also contemplate the essentially double taxation that happens with this form, one to which the sole proprietorship can be subject. The Internal Revenue Program has established four criteria that determine the tax status of a corporation venture. These criteria are essential to all organization formations, but the partnership and sole proprietorship are on a single end on the spectrum even though the corporation and subchapter S company remain on the other. The four criteria are: continuity of life; centralized management; limited liability; free transferability of interest, (Stevenson, Roberts, Grousbeck 451). The partnership doesn't have continuity of life, doesn't posses centralized management, does not enjoy limited liability and cannot freely transfer interest.
The biggest risk of the partnership is that all partners are liable for ones actions of others, except, of course, inside a limited partnership wherever they are responsible only for the amount of capital they've invested. Regardless, exactly where our discussion of the general partnership is concerned, this drawback is a serious consideration, especially when the subchapter S business formation allows for your removal of this risk and also incorporates and easier method of write-offs. Plans for dissolving the business should usually be worked out in advance mainly because partnerships are prone to disastrous consequences from the loss of the partner if none exist.Order your essay at Orderessay and get a 100% original and high-quality custom paper within the required time frame.