Business partnership (co-founders)
What is a partnership?
A partnership is a relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business. You will conduct business under a Partnership Agreement and there are no formal requirements to form. Two common types are general partnership and limited partnership.
General partnership: A form of business in which 2 or more co-owners engage in business for profit. Usually the partners own the business assets together and are personally liable for business debts. Taxes paid by individual partners
Limited partnership: A form of partnership similar to a general partnership, except that in addition to one or more general partners, there are one or more limited partners. These partners are only liable on the business’s debts according to their registered investment, and they have no management authority. The limited partners, in other words, have some protection of personal liability. General partner holds liability and limited partner has assets somewhat protected.
What are the advantages of forming a partnership?
Formation requires no specific legal formalities
Division of responsibility - You share liability with others
Some tax advantages
You have access to more resources, skills, energy and financial assets
What are the disadvantages of forming a partnership?
Set-up usually requires a detailed partner agreement
You have less control
Making decisions is more complicated process
Partners can incur liabilities because of something another partner does. They may not even know it is happening.