Forming a Partnership: The Pros And Cons
Are you thinking about buying a bar with a partner? If so, you need to be certain that a partnership is the appropriate legal structure for your particular business according to our friends at Silverman Law Office, PLLC. For those seeking to go into business, there are multiple legal formats available, and each offers its own unique advantages and disadvantages. To help you assess this question, we have put together a list of the pro and cons of forming a partnership.
The Advantages Offered by Partnerships
- Quick access to additional capital – Starting a new business is notoriously expensive. For example, if you are operating as a sole proprietor, you will be forced to bear much of the costs by yourself. However, if you are working in a partnership, you will have quick access to additional capital, as well as cost-sharing for your fixed expenses.
- Low barrier to entry – Compared to some other business structures, forming a partnership is relatively easy. Indeed, it is generally cheaper and faster to set up a partnership than it is to create an S-corporation. There is far less paperwork required. Further, the very nature of the partnership provides considerable flexibility to the partners.
- Pass-through taxation – Partnerships allow for pass-through taxation. In many cases, this allows business partners to limit their total tax liability. As income earned by the business will be “passed through” and taxed to each partner personally, there will be no need for the partnership to file its own return. When forming a new business, it is always important to consider taxation as one of your expenses.
The Potential Drawbacks of Partnerships
- Lack of liability protection – It is essential to consider your potential liability when forming a business. One of the biggest disadvantages of a partnership is that this legal form does not offer liability protection to the owners of the business. Partners can be held personally liable for all of the debts and expenses incurred by the business.
- Potential management issues – As partnerships are personally invested in their business, they sometimes end in fierce disputes. Should an intractable dispute arise, the partnership may even need to dissolve per state law.
Contact a Business Law Firm Today
There are so many factors to address when you are buying a bar. Before entering into a partnership, it is imperative that you have a strong partnership agreement that will fully protect your rights and interests should there be a serious disagreement. To make sure that your financial interests are protected, call an experienced attorney.