You don't have to register with your state and pay an often hefty fee, as you do to establish a corporation or limited liability company. And because a general partnership is normally a " pass through" tax entity (the partners, not the partnership, are taxed unless you specifically elect to be taxed like a corporation) filing income tax returns is easy. Unlike a regular corporation, there is no need to file separate tax returns for the corporate entity and its owners. But given that the business-related acts of one partner legally bind all others, it is essential that you go into business with a partner or partners you completely trust. It is also essential that you prepare a written partnership agreement establishing, among other things, each partner's share of profits or losses, day-to-day duties and what happens if one partner dies or retires.
Partnerships are relatively easy to establish.
With more than one owner, the ability to raise funds may be increased, both because two or more partners may be able to contribute more funds and because their borrowing capacity may be greater.
Prospective employees may be attracted to the business if given the incentive to become a partner.
A partnership may benefit from the combination of complementary skills of two or more people. There is a wider pool of knowledge, skills and contacts.
Partnerships can be cost-effective as each partner specializes in certain aspects of their business.
Partnerships provide moral support and will allow for more creative brainstorming.
Disadvantages
Business partners are jointly and individually liable for the actions of the other partners.
Profits must be shared with others. You have to decide on how you value each other’s time and skills. What happens if one partner can put in less time due to personal circumstances?
Since decisions are shared, disagreements can occur. A partnership is for the long term, and expectations and situations can change, which can lead to dramatic and traumatic split ups.
The partnership may have a limited life; it may end upon the withdrawal or death of a partner.
A partnership usually has limitations that keep it from becoming a large business.
You have to consult your partner and negotiate more as you cannot make decisions by yourself. You therefore need to be more flexible.
Unlimited liability. General partners are liable without limit for all debts contracted and errors made by the partnership. For example, if you own only 1 percent of the partnership and the business fails, you will be called upon to pay 1 percent of the bills and the other partners will be assessed their 99 percent. However, if your partners cannot pay, you may be called upon to pay all the debts even if you must sell off all your possessions to do so. This makes partnerships too risky for most situations. The answer would be a different business structure.
All partners are personally liable for business debts and liabilities (for example, a judgment in a lawsuit). While it's true that a good insurance policy can do much to reduce lawsuit worries and that many small, savvy businesses don't have debt problems, it's also true that businesses which face significant risks in either of these areas should probably organize themselves as a corporation or LLC.