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A partnership is a type of business that has a minimum of two owners. They decide to set up and run a business between them.

Partnerships are often found in businesses that provide a professional service, such as lawyers, doctors and accountancy practices. They can sometimes be identified by the name of the business. For example, ‘Kowalski & Davies Accountancy’ would probably be an accountancy business with two partners with the surnames Kowalski and Davies.

In a partnership, the owners agree a set of rules. These are outlined in a document called a deed of partnership. As an example, this document may specify how profits are allocated, what percentage of the business each person owns, their roles and responsibilities, and the percentage of any business debts that each person would have to pay. A Deed of Partnership is written to avoid disagreements. Without a Deed of Partnership, profits must be shared equally between all partners.

Some advantages of partnerships:

• they are usually quick and easy to set up
• there is shared decision-making by the owners
• there is shared responsibility for debt by the owners
• more funds can be invested compared to a sole trader
• more ideas and skills
• partners can cover for each other during illness and holidays meaning the business doesn’t have to close

Some disadvantages of partnerships:

• they can involve long work hours
• conflict amongst owners can occur and decision making may be slower
• there is the risk of unlimited liability
• one partner may let the others down by not upholding their responsibilities in the business
• profits are shared between all the partners