Free Essay: Pros and Cons of General Partnerships
Some of the greatest companies and business enterprises have been born out of partnerships between like-minded groups and individuals. Two or more already established companies can also come together to form synergies that thrive into economic giants. On the flip side, there are partnerships and mergers that have been the undoing of potentially great companies. Before individuals or groups get into partnerships they therefore need to understand both the upside and the downside in order to make the right decisions. This essay looks at some of the Pros and Cons of General Partnerships.
A general partnership involves the coming together of individuals to set up a business. General partnerships are usually made between partners who are in the same line of business. The two separate parties have to share the same objectives and goals.
One of the most obvious benefits of a general partnership is the fact that you get to get double financial investment. The two parties will combine their money and have even more financial muscle. A general partnership is also likely to get better deals from financial institutions when carrying out fund raising to start off a business in comparison to an individual. Many people would have never started their business if they had not gotten into financial partnerships.
General partnerships present some sort of security because the risk involved in starting any business is shared. In case the business goes under and there are financial losses, the losses will be divided among the partners as opposed to an individual. This aspect lifts a very heavy load off the back of an individual. The partners also get to share other responsibilities that would really be strenuous on an individual. The partners also get to share the work involved in running the business. In a general partnership, the parties involved combine their contacts. Therefore the new joint venture realized will have double the number of potential customers it had earlier.
The obvious disadvantage is that all the incoming profit will have to be shared amongst more shareholders. In other business structures like a sole proprietorship the profits of the company are not fully taxed and are enjoyed by a few. The members can easily decide how much they can pay themselves.
General partnerships are made between two firms or individuals who are like minded. The two parties coming into a partnership have to be chasing a similar goal. It is very difficult to achieve that state of affairs. General partnerships have been known to bring more harm than good when the parties involved differ in matters concerning work ethics, values and other issues. In the long run the reputation of all those involved in the general partnership is tainted.
Once you are involved in a general partnership you can no longer make decisions without consultation. General partnerships are all about negotiations and compromises. Sometimes people have to shelf ideas they are passionate about to make the partnerships work.
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