Question: What are the risks of operating as a partnership?Answer:
A partnership structure is when two or more people enter into a business together. The potential risks of operating as a partnership are that individual partners are limited in their decision-making power by the other partners. Liability is shared equally, so if one partner gets into trouble or the business becomes bankrupt, the other partners have to share liability equally, for the business as a whole.
There is also the risk of disagreements between partners, which can seriously impact the success and smooth sailing of the business. You need to be careful about choosing who you are going into business with and have a well drafted partnership agreement that protects your interests in the event of a disupte. It is also difficult to carry on the business if one partner retires or passes away, and it is also difficult to sell a partnership interest as it requires the other partners’ consent.