Partnerships are incredibly easy to form because you don’t have to file them with the state. In a way, a partnership is a lot like a sole proprietorship if it were run by multiple people.
The main benefit of having another person running your company is not having to go it alone. Businesses can be a nightmare to manage and often get bigger and more complicated over time, so having another entrepreneur on hand to keep things running smoothly can be a godsend.
Partnerships also allow you to bring new networks and expertise into your business mix. For example, you could find someone skilled in building and managing profitable sales teams. Understanding your weaknesses as an entrepreneur will help you find someone who can fill in your gaps.
Lastly, partnerships don’t pay business income tax. The taxes and liabilities pass through the business, and the partners pay sole-proprietorship taxes based on their share of the income.
Sharing liability is a bit of a double-edged sword because, on the one hand, it means you don’t have to shoulder the burden all by yourself, but on the other, you are personally responsible for the actions of your partner.
Because partners also share in all the profits according to their ownership percentage in the company, you can’t unilaterally make decisions about reinvesting profits—each partner will get to decide how to invest their profits.
So, if your partner’s bad business decisions lead to a lawsuit, and that partner has spent all their profits, you may have to pay any fees assessed.