Partnership Firm
Best for: Two or more individuals who want to share ownership, responsibilities, and profits.
Key Features:
- Ownership: Shared between two or more partners.
- Liability: In a general partnership, partners share unlimited liability for the business’s debts. However, in a limited partnership (LP), some partners can limit their liability.
- Control: Partners share control, and decisions must be agreed upon by all (unless otherwise specified in the partnership agreement).
- Taxation: Taxation are higher than the other form of entities.
Advantages:
- Easy to set up, with a partnership agreement to outline responsibilities.
- Shared financial responsibility and pooling of resources.
- Flexibility in management and decision-making.
Disadvantages:
- Unlimited liability for general partners (can affect personal assets).
- Potential conflicts between partners.
- Difficulty in raising capital from external sources.
When to Choose a Partnership Firm?
If you’re collaborating with a business partner who shares the same vision and goals.
If you can’t afford the complexity or cost of incorporating but need more flexibility than a sole proprietorship.
If you’re in a business that benefits from shared expertise (e.g., consulting firms, law firms, small retail shops).