These come in two types: general and limited. In general partnerships, both owners invest their money, property, labor, etc. to the business and are both 100% liable for business debts. In other words, even if you invest a little into a general partnership, you are still potentially responsible for all its debt.

 

General partnerships do not require a formal agreement—partnerships can be verbal or even implied between the two business owners.

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Limited partnerships require a formal agreement between the partners. They must also file a certificate of partnership with the state. Limited partnerships allow partners to limit their own liability for business debts according to their portion of ownership or investment.

 

Advantages of partnerships:

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• Shared resources provide more capital for the business

• Each partner shares the total profits of the company

• Similar flexibility and simple design of a proprietorship

• Inexpensive to establish a business partnership, formal or informal

 

Disadvantages:

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• Each partner is 100% responsible for debts and losses

• Selling the business is difficult—requires finding a new partner

• The partnership ends when any partner decides to end it