Partnership

A partnership involves two or more partners (people or entities) carrying on a business together with a view to profit. Partnerships are governed by the Partnership Act of the state or territory in which the partnership was formed, and are limited to a maximum of 20 partners.

Partnerships have the following advantages:

  • It's relatively easy and inexpensive to set up.
  • Each partner has shared control and management of the business.
  • Partners are jointly contributing their labor, capital and skills to build the business. This increases the businesses chance of survival/success. (as compared to sole traders). 
  • Ability for income splitting.
  • Easy to dissolve.
  • Limited external regulation and partners business affairs are private.

The disadvantages with partnerships are:

  • Each partner is jointly liable for all partnership debts (unlimited liability).
  • Each partner is an agent of the partnership and is liable for actions by other partners.
  • There is the risk of disagreements and conflict between partners.