BUSINESS DISADVANTAGES OF THE PARTNERSHIP FORM

Articles In This Section:

· Form of business and financing

· BUSINESS ADVANTAGES OF OPERATING AS A SOLE PROPRIETOR

· BUSINESS DISADVANTAGES OF OPERATING AS A SOLE PROPRIETOR

· BUSINESS FINANCING

· WHAT TYPES OF BUSINESS LOANS

· LOANS FOR THE BUSINESS

· A LINE OF CREDIT FOR THE BUSINESS

· How a Sole Proprietorship is Taxed

· BUSINESS ADVANTAGES OF THE PARTNERSHIP FORM

· BUSINESS DISADVANTAGES OF THE PARTNERSHIP FORM

· THREE RULES AS BUSINESS PARTNERS

· BUSINESS TAXATION

· BUSINESS CORPORATION

· BUSINESS DISADVANTAGES OF THE CORPORATE FORM

· BUSINESS CORPORATE FINANCING

· BUSINESS STOCKHOLDER ELECTION TO REPORT CORPORATE INCOME

· MAKING THE BUSINESS ELECTION

· HOW THE BUSINESS ELECTION IS LOST

· BUSINESS ADVANTAGES AND DISADVANTAGES OF STOCKHOLDER REPORTING OFCORPORATE INCOME

Each partner has unlimited liability for the debts of the partnership. Each partner can bind the partnership and the individual partners when acting within the scope of business. (Note: a partner can obtain insurance against this type of liability.) The partnership automatically terminates upon the death, withdrawal, bankruptcy or legal declaration of insanity of any one partner. There can be great difficulties in removing a partner from a partnership. There is the possibility of lack of unanimity among the partners and resulting serious complications if a deadlock should occur. The partnership interest is not readily marketable. This is due to the fact that the characteristic of a partner is a personal relationship to the partnership. Some of the disadvantages of a partnership form may be overcome by the hybrid form of operation known as the limited partnership. It has the advantage of limiting the liability of those who do not wish to be general partners to the cash investment made by each. Creditors must be notified of the limited liability set out in the partnership articles. Consult with your attorney before entering into a partnership or a limited partnership agreement. Remember: in the absence of specific written agreement between partners, the law defines the rights and obligations between them. Your partnership agreement (in writing, of course) should include at least the following:

The kind of business to be conducted.

The amount to be invested by each partner.

Precise mention of the division of profits and losses.

The powers and duties of each partner.

The compensation, if any, to be paid to each partner.

The partners' drawings.

Division of assets and other matters in case of dissolution.

Duration of the partnership, and the manner in which it is to be dissolved.

The withdrawal of partners and the admission of new partners. The manner in which differences of opinion are to be settled— you might provide for formal arbitration. Finally, anything else of importance around which some future dispute may center. Remember: do not consent to habitual violations of any part of your partnership agreement unless you want to lose those rights permanently. Be exceedingly careful in the choice of your partners. Their power to obligate the partnership is exceedingly broad. Your partners' acts may cause you to lose not only your investment, but your private property as well.