What are some disadvantages and advantages of being in a business partnership?

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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There are many advantages and disadvantages to being in a partnership as opposed to some other form of business ownership.  Please click on the link below to read a detailed account of all of them.

The most important advantage of being in a business partnership is that it is simple and flexible while still offering some ability to collaborate.  A sole proprietor has no one to help them run the firm.  A large company has a complex and inflexible system.  A partnership is a nice medium between these two extremes.

The most important disadvantage of a partnership is the unlimited liability.  Partners in a firm are liable for all debts incurred by the firm.  What’s more, their personal wealth (and not just the company’s assets) can be seized to pay off debts.  Therefore, this is a somewhat risky form of ownership if any serious debt is contemplated.

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jesseldridge | (Level 1) Salutatorian

Posted on

A partnership is an agreement between two or more people to finance and operate a business. There are some distinct advantages and disadvantages of a partnership in a business. They are as follows:


  • It’s relatively easy to establish.
  • In partnership, borrowing capacity may be greater as there is a greater ability to raise funds.
  • Potential employees may be involved in the business in the future if given the incentive to become a partner.
  • There is a wider possibility of greater skills and experience as there is a combination of skills of two or more people.
  • It can be very cost-effective to each partner.



  • Partners are equally and independently responsible for the actions of the other partners.
  • Business profits must be shared with each partner as per the agreement.
  • Withdrawal of any partner may end partnership so we can say that it has a limited life.

Unlimited liability is one of the major disadvantages of the partnership.

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