Business Partnerships

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Business partnerships
Question 1
Advantages of business partnerships include (Jux Law Firm, np):
Businesses which are in the form of partnerships are not required by law to pay income tax. Instead, each partner files the losses or profits of the business partnership as their personal income tax return. Therefore, the business is exempted from paying taxes.
Business partnerships are also easy to establish. There is no much legal procedure for one to start a partnership, especially a general partnership. The cost of starting a business partnership is lower compared to other forms of business such as a public limited company.
Since there is more than one owner in a business partnership, it is easier to raise funds. The various partners also increase the borrowing capacity of the business.
In a business partnership, there is a wider pool of skills, contacts, and knowledge. This is due to the presence of more than one partner. This brings about improved management.
Disadvantages of a business partnership include (Jux Law Firm, np):
There is a joint liability for general partners in a business partnership. All the general partners are responsible for the actions taken by other partners regarding the business partnership. These liabilities may include contracts and breaches of trust. A third party can, therefore, sue all the partners by just using one of them. When one general partner is sued, the rest become liable. Also, if the business is unable to pay debts, then the creditors can decide to take possession of the general partners’ personal assets.

However, for limited partners, such liability is restricted.
In case one of the partners withdraws or dies, the business partnership may become unstable, risking dissolution.
Decisions in business partnerships must be unanimous. A lot of time is therefore taken in making decisions.
Question 2
The main difference between general partners and limited partners is that, for general partners, apart from contributing assets to the business partnership, they also contribute to management and liabilities of the business. General partners have management responsibilities in the business and are also totally liable for the business in regards to money/debts and potential lawsuits. On the other hand, limited partners only provide assets to the business. They have no management responsibilities. They also have no personal liability to the business. Due to their capital contribution, limited partners are still entitled to profits of the business (Jux Law Firm, np).
Works cited
Jux Law Firm. “Advantages And Disadvantages Of Different Business Entities”. JUX Law Firm, 2017, https://jux.law/advantages-and-disadvantages-of-business-entities-mn-business-lawyer/. Accessed 13 May 2018.