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Partnerships: general and limited liabil... > Partnerships: general and limited li... - Pg. 7

TyPES oF bUSInESS STRUCTURE AnD ThEIR FInAnCE 7 to be allowed or charged to partners on loans or advances, and provi- sions for accounts, audits and so on. Some of the principal advantages of a partnership It is usually possible to raise more capital than a sole trader can. There are various types of partnerships, including limited liability partnerships. Partners may bring additional skills, contacts and knowledge. The accounting and reporting might be a little simpler than for a company. Some of the principal disadvantages of a partnership Partners may be held jointly and severally liable for the partnership debts. For example, if one partner fails to pay, the other partners may have to pay the failed partner's share. The partnership has to be dissolved when a partner dies, becomes bankrupt or leaves the partnership. A partnership agreement needs careful drafting. Some countries place restrictions on the number of partners allowed in a partnership, although there may be exemptions for certain types of business. If you decide that a partnership is the most appropriate type of business structure then it is best to consult a lawyer who can advise you of any constraints and help draft a partnership agreement. At this stage you will also need to decide upon the type of partnership that is best for your business. A general partnership will only have `general members', where each partner is involved in the management and running of the partnership and takes responsibility for the liabilities of the firm, becoming both jointly and severally liable. This might be a real concern for some poten- tial partners and would deter them from entering into such a partnership. To get round this it is possible to form a limited partnership whereby some members have their liability limited to a certain amount. This type of partnership will have both general and limited partners. Often the limited partners do not participate in the management of the firm.