A partnership is a business where there are two or more owners of the enterprise. Most partnerships are between two and twenty members though there are examples like John Lewis and some of the major world accountancy firms where there are hundreds of partners.
A partner is normally set up using a Deed of Partnership. This contains:
The advantages of a sole trader becoming a partnership are:
For example, a builder, working originally as a sole trader, may team up with an architect or carpenter to form a partnership. Either would bring added expertise, but also might bring added capital and/or contacts. Of course the builder could team up with another builder as well – sharing the risk, and potentially the workload.
The main disadvantages of becoming a partnership are:
The next step for a partnership is to move towards becoming a private limited company. However some partnerships do not want to move to this stage.
The advantages of remaining a partnership rather than becoming a private limited company are:
When a partnership finishes then, depending on how the Deed of Partnership is set up, each partner has an agreed slice of the business.
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