Partnership is one of main keys for successful business. It is not a must for you to establish partnership when running your own business. However, it is a great choice if it benefits your business. Establishing partnership is not easy because it should be built by trust. You cannot just join partnership without knowing who your partner is and what kind arrangement you are getting into. There are also different types of partnerships in business you should know about. Choosing one of them should be done carefully because each has different characteristics and arrangement. One of the most common types is general partnership.
All about general partnership in business
General partnership itself is a formally business arrangement between two or more parties who agree to share all assets, profit, as well as financial and legal liabilities of a jointly-owned business structure. This is the most common partnerships practiced in business. The point of this partnership is that there is unlimited liability which put every individual to be liable in the matter of their personal assets to the partnership’s obligation including debts.
Responsibilities of Tax Liabilities
In this arrangement, partners are also responsible for their own tax liabilities. The good point of this partnership is the flexibility all participants have to build their own structure of the business however they see it fits. They also have more control to the operations. As the result, the decision regarding to the management can be made swiftly and decisively. It is definitely more efficient compared with the corporations in which bureaucracy is always too time-consuming and complicated.
Agreement on Liabilities
In general partnership, two people/parties should be minimally include. The liability that may incur into the partnership should be agreed by all partners as well. Partnership agreement should be formally written to memorialize it. Oral agreements can be made as well. However, written agreement can prevent legal issues in the future.
In general partnership, every parties involved are consequently obligated to adhere to various terms such as business deals, binding agreements, etc. those activities may not only lead to agreements but disagreements as well. However, it is inevitable. Conflict is to be expected but the point is how to build effective conflict resolution mechanism so everything can be settled peacefully in the end.
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In general partnership, when one partner dies then the partnership and agreement automatically dissolve. It also happens when one party becomes disabled or just simply exits the partnership. However, there must be provisions which arranges this particular situation to be handled properly. For example, the interest of the deceased partner is going to be transferred to the surviving partner, etc.
There are advantages and disadvantages of general partnership for business. To avoid unnecessary threats and risks, you need to consider carefully of who you are going to be partnered with, especially if it is a long-term partnership type. As for general partnership, the benefit is that is the considerably cheaper cost. It also involves less paperwork compared with setting up a corporation or other types of partnerships such as limited liability partnership.