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ABA Family Legal Guide

Forming and Operating a Small Business

Types of Business Organizations

Partnerships

What are the advantages of partnerships?

There are several advantages to a partnership as opposed to a sole proprietorship or corporation.

  • Partnerships can be flexible; the partners have the ability to make virtually any arrangements defining their relationship to each other that they desire. The partners can agree to split the ownership and profits in flexible ways, and losses can be allocated on a different basis from profits.
  • Because you can sell equity interests (ownership) in a partnership, it's easier to raise capital in a partnership than in a sole proprietorship. (However, since investors are more familiar with the corporate form, a corporation may have a greater ability to raise capital than a partnership.)
  • With careful advance planning, a partnership can avoid some of the problems inherent in a proprietorship when an owner dies, retires, or becomes disabled.
    • American Bar Association Family Legal Guide
    Copyright © 2004 American Bar Association
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