A partnership exists when two or more people own a business together with a view to

making a profit.

Each partner is a part owner of the business and has a right to take part in its running.
Ordinary partners have UNLIMITED LIABILITY. If the business fails they can each
lose all their personal possession, not just the money they invested in the business.
A maximum of 20 partners is allowed in a general partnership. There are exceptions to
this such as solicitors, accountants, and estate agents.
In law it is assumed that the partners share all capital, profit and responsibility equally.
If the partners want to do something different from this they must draw up a legal
o
documents, which sets out the terms of the partnership. This is called a DEED OF
PARTNERSHIP.
A Sleeping Partner is someone who invests money into the Partnership but does not play
an active role in the business
Sleeping Partners have LIMITED LIABILITY

Advantages of Partnerships Disadvantages of Partnerships

Have to share profits
Spreads the risk across more people, so if the Less control of business for individual
business gets into difficulty then the are more Disputes over workload
people to share the burden of debt Problems if partners disagree over of
To obtain capital for a business. Many businesses direction of business
start out as partnerships. It may take more
capital to set up the business than the single
person can raise.
Partner may bring money and resources to the
business
To get someone to share the work and the
responsibility of running the business. Examples of partnerships:
To add new skills and ideas to the business. dentists
Partners can specialise in certain aspects of solicitors
the business. estate agents
Increased credibility with potential customers building firms
and suppliers –who may see dealing with the accountants.
business as less risky than trading with just a
sole trader