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What are some advantages and disadvantages of partnerships?

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Quick Answer

Partnerships are advantageous because they allow for the sharing of financial responsibilities, they are easy to start and they offer complementary skills. Disadvantages of partnerships may include frequent disputes, sharing of profits and joint liability. Partnerships are businesses owned by two or more people, notes the United States Small Business Administration (SBA).

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Full Answer

There are three types of partnerships including limited, general and joint venture partnerships, notes the SBA.

One advantage of partnerships is that they allow both partners to shoulder the burden of losses. Partnerships make it easy to raise capital and manage the business. In some cases, partnerships may provide incentives to employees in the form of promotion to a partner status.

A disadvantage of partnerships is that all partners share the profits, which may not be much. Another disadvantage is that equal partners may wish to assert their authority, leading to frequent confrontations or disputes. Partners are held accountable for any decisions made by a partner, even if the decision is costly.

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