{"id":2957,"date":"2023-02-19T16:11:12","date_gmt":"2023-02-19T16:11:12","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/partnerships\/"},"modified":"2023-07-21T15:46:10","modified_gmt":"2023-07-21T15:46:10","slug":"partnerships","status":"publish","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/partnerships\/","title":{"raw":"Learn It 7.2.2: Partnerships","rendered":"Learn It 7.2.2: Partnerships"},"content":{"raw":"<h2><strong>Advantages of a Partnership<\/strong><\/h2>\r\n<ul>\r\n \t<li><strong>Easy and Inexpensive.<\/strong>\u00a0Partnerships are generally an inexpensive and easily formed business structure. The majority of time spent starting a partnership often focuses on developing the partnership agreement.<\/li>\r\n \t<li><strong>Shared Financial Commitment.<\/strong>\u00a0In a partnership, each partner is equally invested in the success of the business. Partnerships have the advantage of pooling resources to obtain capital. This can\u00a0be beneficial in terms of securing credit or by simply doubling the\u00a0seed money available.<\/li>\r\n \t<li><strong>Complementary Skills.<\/strong>\u00a0A good partnership should capitalize on\u00a0the benefits of being able to utilize the strengths, resources, and expertise of each partner.<\/li>\r\n \t<li><strong>Partnership Incentives for Employees.<\/strong>\u00a0Partnerships have an employment advantage over other entities if they offer employees the opportunity to become a partner. Partnership incentives often attract highly motivated and qualified employees.<\/li>\r\n<\/ul>\r\n<h2><strong>Disadvantages of a Partnership\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/strong><\/h2>\r\n<ul>\r\n \t<li><strong>Joint and Individual Liability.<\/strong>\u00a0Similar to sole proprietorships, partnerships retain full, shared liability among the owners. Partners are not only liable for their own actions but also for the business debts and decisions made by other partners. In addition, the personal assets of all partners can be used to satisfy the partnership\u2019s debt.<\/li>\r\n \t<li><strong>Disagreements Among Partners.<\/strong>\u00a0With multiple partners, there are bound to be disagreements. Partners should consult one\u00a0another on all decisions, make compromises, and resolve disputes as amicably as possible.<\/li>\r\n \t<li><strong>Shared Profits.<\/strong>\u00a0Because partnerships are jointly owned, each partner must share the successes and profits of their business with the other partners. An unequal contribution of time, effort, or resources can cause discord among partners.<\/li>\r\n<\/ul>\r\n<section class=\"textbox example\">\r\n<h3>TW Construction or T&amp;T Construction?<\/h3>\r\n<img class=\"alignright wp-image-8189\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/11\/01175331\/4964993485_acb23b3be5_b.jpg\" alt=\"a man and a woman both wearing paint-covered overalls\" width=\"259\" height=\"194\" \/>For several months, Tareq has been operating as a sole proprietorship and enjoying the control he maintains over\u00a0his work and finances. Business is picking up, and he has recently been contacted by a construction firm that wants to hire him to provide the trim carpentry for several large oceanfront homes they are building. He mentions this to his friend Todd, who seems very happy that Tareq's new business venture appears to be succeeding. A\u00a0month later, Todd calls and asks Tareq to meet him for dinner\u00a0at Sandbar's. During\u00a0dinner, Todd proposes to Tareq that the two of them\u00a0form a general partnership: T&amp;T Construction. Todd points out\u00a0that taking on several large jobs as a sole proprietor is very\u00a0risky\u2014a partnership would mean shared risk and responsibility. He also offers to contribute some initial capital to the newly formed partnership, which would\u00a0provide financial support for their day-to-day operations. Finally, Todd makes the case that, as a frame carpenter, he has skills that would complement Tareq's and potentially yield\u00a0additional business opportunities.\r\n\r\n<span style=\"color: #333333;\">Surprised by the proposal, Tareq tells his friend that he needs some time to think it over before committing. During the next<\/span>\u00a0few days, he\u00a0calls his accountant, Luana, to find out how the partnership would\u00a0impact his business. He learns\u00a0that\u00a0he would have to share control of the business and also share the profits. That doesn't sound bad to Tareq, especially if the business really grew\u2014which it might, with the addition of Todd's skills and labor. Tareq is leaning toward accepting the offer.\r\n\r\nBut when Luana tells him that he would\u00a0be held responsible not only for the debts of the business but also the actions of his partner, he sours on the idea. He knows Todd has made some business decisions and deals that were a little on the sketchy side. Under the proposed General Partnership structure, if Todd made similar kinds of decisions or deals\u2014even without Tareq's knowledge\u2014Tareq could be held responsible and liable for the consequences. He realizes he's not willing to accept\u00a0that kind of risk. He decides to turn down Todd's offer and keep running his business as a sole proprietor.\r\n\r\n<\/section><section class=\"textbox tryIt\">[ohm2_question height=\"350\"]3904[\/ohm2_question]<\/section>","rendered":"<h2><strong>Advantages of a Partnership<\/strong><\/h2>\n<ul>\n<li><strong>Easy and Inexpensive.<\/strong>\u00a0Partnerships are generally an inexpensive and easily formed business structure. The majority of time spent starting a partnership often focuses on developing the partnership agreement.<\/li>\n<li><strong>Shared Financial Commitment.<\/strong>\u00a0In a partnership, each partner is equally invested in the success of the business. Partnerships have the advantage of pooling resources to obtain capital. This can\u00a0be beneficial in terms of securing credit or by simply doubling the\u00a0seed money available.<\/li>\n<li><strong>Complementary Skills.<\/strong>\u00a0A good partnership should capitalize on\u00a0the benefits of being able to utilize the strengths, resources, and expertise of each partner.<\/li>\n<li><strong>Partnership Incentives for Employees.<\/strong>\u00a0Partnerships have an employment advantage over other entities if they offer employees the opportunity to become a partner. Partnership incentives often attract highly motivated and qualified employees.<\/li>\n<\/ul>\n<h2><strong>Disadvantages of a Partnership\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/strong><\/h2>\n<ul>\n<li><strong>Joint and Individual Liability.<\/strong>\u00a0Similar to sole proprietorships, partnerships retain full, shared liability among the owners. Partners are not only liable for their own actions but also for the business debts and decisions made by other partners. In addition, the personal assets of all partners can be used to satisfy the partnership\u2019s debt.<\/li>\n<li><strong>Disagreements Among Partners.<\/strong>\u00a0With multiple partners, there are bound to be disagreements. Partners should consult one\u00a0another on all decisions, make compromises, and resolve disputes as amicably as possible.<\/li>\n<li><strong>Shared Profits.<\/strong>\u00a0Because partnerships are jointly owned, each partner must share the successes and profits of their business with the other partners. An unequal contribution of time, effort, or resources can cause discord among partners.<\/li>\n<\/ul>\n<section class=\"textbox example\">\n<h3>TW Construction or T&amp;T Construction?<\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-8189\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/143\/2016\/11\/01175331\/4964993485_acb23b3be5_b.jpg\" alt=\"a man and a woman both wearing paint-covered overalls\" width=\"259\" height=\"194\" \/>For several months, Tareq has been operating as a sole proprietorship and enjoying the control he maintains over\u00a0his work and finances. Business is picking up, and he has recently been contacted by a construction firm that wants to hire him to provide the trim carpentry for several large oceanfront homes they are building. He mentions this to his friend Todd, who seems very happy that Tareq&#8217;s new business venture appears to be succeeding. A\u00a0month later, Todd calls and asks Tareq to meet him for dinner\u00a0at Sandbar&#8217;s. During\u00a0dinner, Todd proposes to Tareq that the two of them\u00a0form a general partnership: T&amp;T Construction. Todd points out\u00a0that taking on several large jobs as a sole proprietor is very\u00a0risky\u2014a partnership would mean shared risk and responsibility. He also offers to contribute some initial capital to the newly formed partnership, which would\u00a0provide financial support for their day-to-day operations. Finally, Todd makes the case that, as a frame carpenter, he has skills that would complement Tareq&#8217;s and potentially yield\u00a0additional business opportunities.<\/p>\n<p><span style=\"color: #333333;\">Surprised by the proposal, Tareq tells his friend that he needs some time to think it over before committing. During the next<\/span>\u00a0few days, he\u00a0calls his accountant, Luana, to find out how the partnership would\u00a0impact his business. He learns\u00a0that\u00a0he would have to share control of the business and also share the profits. That doesn&#8217;t sound bad to Tareq, especially if the business really grew\u2014which it might, with the addition of Todd&#8217;s skills and labor. Tareq is leaning toward accepting the offer.<\/p>\n<p>But when Luana tells him that he would\u00a0be held responsible not only for the debts of the business but also the actions of his partner, he sours on the idea. He knows Todd has made some business decisions and deals that were a little on the sketchy side. Under the proposed General Partnership structure, if Todd made similar kinds of decisions or deals\u2014even without Tareq&#8217;s knowledge\u2014Tareq could be held responsible and liable for the consequences. He realizes he&#8217;s not willing to accept\u00a0that kind of risk. He decides to turn down Todd&#8217;s offer and keep running his business as a sole proprietor.<\/p>\n<\/section>\n<section class=\"textbox tryIt\"><iframe loading=\"lazy\" id=\"ohm3904\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=3904&theme=lumen&iframe_resize_id=ohm3904&source=tnh&show_question_numbers\" width=\"100%\" height=\"350\"><\/iframe><\/section>\n","protected":false},"author":21,"menu_order":10,"template":"","meta":{"_candela_citation":"[{\"type\":\"pd\",\"description\":\"Partnership\",\"author\":\"\",\"organization\":\"SBA\",\"url\":\"https:\/\/www.sba.gov\/starting-business\/choose-your-business-structure\/partnership\",\"project\":\"\",\"license\":\"pd\",\"license_terms\":\"\"},{\"type\":\"original\",\"description\":\"Revision and adaptation\",\"author\":\"Linda Williams and Lumen Learning\",\"organization\":\"\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Stephanie and Rob: Paint and Decorators\",\"author\":\"J Mark Dodds\",\"organization\":\"\",\"url\":\"https:\/\/www.flickr.com\/photos\/markdodds\/4964993485\/\",\"project\":\"\",\"license\":\"cc-by-nc-nd\",\"license_terms\":\"\"},{\"type\":\"original\",\"description\":\"Practice Questions\",\"author\":\"Robert Danielson\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"part":2947,"module-header":"learn_it","content_attributions":[{"type":"pd","description":"Partnership","author":"","organization":"SBA","url":"https:\/\/www.sba.gov\/starting-business\/choose-your-business-structure\/partnership","project":"","license":"pd","license_terms":""},{"type":"original","description":"Revision and adaptation","author":"Linda Williams and Lumen Learning","organization":"","url":"","project":"","license":"cc-by","license_terms":""},{"type":"cc","description":"Stephanie and Rob: Paint and Decorators","author":"J Mark Dodds","organization":"","url":"https:\/\/www.flickr.com\/photos\/markdodds\/4964993485\/","project":"","license":"cc-by-nc-nd","license_terms":""},{"type":"original","description":"Practice Questions","author":"Robert Danielson","organization":"Lumen Learning","url":"","project":"","license":"cc-by","license_terms":""}],"internal_book_links":[],"video_content":null,"cc_video_embed_content":{"cc_scripts":"","media_targets":[]},"try_it_collection":null,"_links":{"self":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/2957"}],"collection":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/wp\/v2\/users\/21"}],"version-history":[{"count":6,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/2957\/revisions"}],"predecessor-version":[{"id":7860,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/2957\/revisions\/7860"}],"part":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/parts\/2947"}],"metadata":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapters\/2957\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/wp\/v2\/media?parent=2957"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/pressbooks\/v2\/chapter-type?post=2957"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/wp\/v2\/contributor?post=2957"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/wp-json\/wp\/v2\/license?post=2957"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}