Paper Sample. Advantages and Disadvantages of General Partnership

Published: 2023-04-09
Paper Sample. Advantages and Disadvantages of General Partnership
Type of paper:  Course work
Categories:  Business management Business communication
Pages: 2
Wordcount: 548 words
5 min read

A general partnership is a legal structure that brings two or more individuals, corporations, or trusts that are in agreement to work together in existence. In this structure, all business partners have an equal share in the responsibility of the business liability. This paper discusses several advantages and disadvantages of a general partnership.

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Advantages of General Partnership

General partnerships are simple to form. Few legal formalities are required in establishing this kind of structure as compared to corporations. Any two people working together to make a profit in an organization are eligible for a partnership. The only document needed is the partnership agreement that comprises of the responsibilities of each partner in the business.

Secondly, a general partnership allows several people to come together. People with different backgrounds combine and pool their resources together and start a company. It brings about diversity in leadership and management, which yields high profits in the business. These experiences and skills from diverse individuals help an organization in having lasting power and dominance in the business competitive world.

Thirdly, there are no tax withholding requirements required. In a general partnership, each partner is not responsible for withholding tax payments from one other. There is no actual taxation of the business since all the revenue is reflected in an individual's tax returns. That simplifies the filling process in an organization.

Finally, more capital is raised by the company. Unlike a sole business where funding of the business is entirely with a single person, many people can be involved in fundraising efforts. The more active people are, the more the chances of success; thus, the partnership benefits from the efficiencies.

Disadvantages of General Partnership

An individual's assets are at risk; since the structure does not act as an independent entity, financial protections of partners are not found within the organization's structure. In case there are financial crises in the organization, each partner is held liable with his income at the cost being incurred.

In addition, disputes in the organization limit the growth of the business. Conflicting ideas and visions by partners may arise in the running of the organization. Continued differences hinder the growth of the business drawing away potential customers and tarnishing an organization's image. Partners may decide to split and dissolve the structure due to prolonged misunderstanding.

Thirdly, general partnership lacks a proper structure. While forming this structure, most organizations state only the broad outlines. Partners only consider the financial factor leaving out the structure and the responsibilities that affect profits and opinions in the business. A general partnership should have a structure that outlines each partner's roles and responsibilities, the management to be applied, how the profits and losses will be evenly distributed among partners.

Additionally, general partnerships have untimely termination, even when the business is ongoing. If a partner decides to leave the company or dies unexpectedly, the organization is terminated without an agreement. A partnership should have an agreement that necessitates the presence of all partners for a business to have life. In case of termination, all assets are evenly distributed to partners, and the organization restarted again.


Gaille, B. (2018, September 3). 403 Forbidden. 403 Forbidden.

Haimo, Esq., B. E. (2016, July 26). What Are the Advantages and Disadvantages of a General Partnership? Haimo Law.

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