Types of Business II – Partnership

The second type of business model is a partnership.

Partnerships are not different from sole proprietorships other than they are started and run by more than one person: two people or several people.  Therefore, the amount of start-up capital is multiplied by the people in the partnership, but the only starting capital comes from the partners’ own pockets or through personal loans.

In a partnership, one is the most vulnerable and liable, much more than other business models.  Why?  If a partner does something wrong, every person in the partnership is deemed liable, and like a sole proprietorship, the partners’ and business assets are looked upon as one and the same each partner can be taken for everything they own regardless of who is at fault.

In a partnership, it is recommended that you create specific rules all partners must abide by.  For example, how much money a partner can spend without consulting the others. Also, it is recommended that partnerships hold regular meetings and record minutes on anything agreed on and who says what.  Will it save each partner from initially losing money should there be problems?  Probably not, but the partners would have documentation should they want to countersue each other later to attempt to recoup losses.