What is a partnership?

A partnership is an agreement in which two or more parties combine their resources together in one business.

What are the different types of partnerships?

A general partnership is one in which all partners share the management of the business, and each partner is personally liable for the all the debts and obligations of the business. This means that each partner is responsible for, and must assume the consequences of, the actions of all the other partners.

A limited partnership is a partnership consisting of one or more general partners who manage the business and who are personally liable for the debts and obligations of the partnership, and one or more limited partners whose liability is limited to the amount of their investment, provided that they do not take part in managing the partnership.

Is it necessary to have a written Partnership Agreement?

A written agreement is not required - as soon as you start doing business with another party, you have created a partnership. However, it is advisable to put the terms of your relationship in writing, in order to protect each of the partners in the event of a dispute, or dissolution of the partnership. If you decide not to write up a formal agreement, the laws regulating partnerships in your area will govern the partnership.

So why should we enter into a partnership, instead of setting up a corporation or other type of incorporated structure?

There are a number of advantages to a partnership. For instance, it's easy to set one up, the start-up costs are relatively low, and taxes are often lower than corporate income taxes. There are fewer regulations to operating a partnership, and the responsibility for managing the business is shared.

Are there disadvantages?

The liability of the partners is much higher than is the case in a corporation or limited company, and if a partner decides to leave, either the partnership dissolves or, if a suitable replacement partner is found, the structure and complexion of the business changes. Management authority resides in several individuals, which can result in disputes. It can be difficult to raise additional operating capital as and when needed.


What is a joint venture?

A joint venture is a business venture between two or more parties which takes the form of a short or fixed-term partnership.

When would a joint venture be a preferable alternative to a regular type of partnership?

A joint venture is a preferred vehicle for a business venture with a foreseeable end date, or for a specific project or objective, such as for researching and developing a new product or technology; access to new markets and distribution networks; sharing a business risk with other venturers.

What are the potential problems associated with joint ventures?

Joint ventures are popular between businesses located in different countries, and this can give rise to jurisdictional and cultural issues. Problems can also result from insufficient leadership and support, or an imbalance in the amount of expertise, capital and assets brought into the venture by the various partners.


What is a business alliance?

A business alliance is an agreement between related or complementary businesses, usually motivated by the need to reduce costs and improve services for the customer. An example of this is code sharing in airline alliances. Many if not all large airlines participate in one or more business alliances.


The foregoing summary is provided for information purposes only and is not to be considered legal or business advice. The information may not be complete, accurate or applicable for any particular situation and should not be relied upon.