Types of Businesses- Partnerships

Partnerships are much like sole traders, the only exception is that there is more than 1 owner. This usually occurs in the professional industries e.g. lawyers, accountants, doctors. When you hear about a law firm or an accounting firm that word 'firm' refers to a partnership.

Often businesses may start out as sole traders, and then move on the partnerships. What may be the reasons for this?

1. need extra funding without wanting to borrow money (interest costs)
2. extra skills
3. share in the workload

However as with anything, disadvantages do exist.

1. unlimited liability exists just like a sole trader business
2. profits must be shared
3. one partner's actions can ruin the entire business
4. if a partner leaves, the partnership is dissolved and a new partnership agreement must be formed
5. a partnership agreement is usually required, however if one does not exist there are some default terms that are available.
   

Next up, joint stock companies!