Partnership – advantages and disadvantages | Business Tasmania

Consider a partnership if the number of people involved is small (up to about 20) and limited liability is not necessary.

Advantages of a partnership include that:

• two heads (or more) are better than one
• your business is easy to establish and start-up costs are low
• more capital is available for the business
• you’ll have greater borrowing capacity
• high-calibre employees can be made partners
• there is opportunity for income splitting, an advantage of particular importance due to resultant tax savings
• partners’ business affairs are private
• there is limited external regulation
• it’s easy to change your legal structure later if circumstances change.

Disadvantages of a partnership include that:

• the liability of the partners for the debts of the business is unlimited
• each partner is ‘jointly and severally’ liable for the partnership’s debts; that is, each partner is liable for their share of the partnership debts as well as being liable for all the debts
• there is a risk of disagreements and friction among partners and management
• each partner is an agent of the partnership and is liable for actions by other partners
• if partners join or leave, you will probably have to value all the partnership assets and this can be costly.

To end or dissolve a partnership in Tasmania we recommend seeking legal advice regarding what is required.