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Lawyers, estate agents, doctor and dental practises often operate as partnerships.

A partnership is a business set up by the deed of partnership document.

The deed of partnership document sets out the terms of the partnership. For example it states how much money each partner invested in the partnership and what role each partner will have in the partnership.

A partner who invests but is not involved in the day-to-day running of a partnership is called a sleeping partner.

Advantages

Partnerships can raise more finance than sole traders. Banks are more likely to lend money to an organisation that has many partners than to a sole trader.

Different partners can bring different skills to the business. For example a partnership running a garage might have some partners who are excellent mechanics while other partners may have excellent sales skills.

Partners can share the workload and responsibility of the business between them. In comparison a sole trader has no-one with whom to share their workload and responsibilities.

Disadvantages

Partners may disagree and argue about the future direction of their business. In contrast, a sole trader has the advantage of being the only decision maker.

Any profit made is shared between two to twenty people. A sole trader has the advantage of receiving all profit.

Like sole traders, partnerships have unlimited liability. All partners have the worry of being liable for any business debt the partnership has.