Starting Your New Company: Business Partnership Advantages
- August 6th, 2014
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A partnership is one of several types of businesses that you can establish when starting a new company. There are a variety of reasons that some types of businesses are better suited than others for particular companies, so it’s important to get a clear understanding of all of your options before making a decision. There are different kinds of partnerships to choose from, but business partnership advantages that exist are relevant to any kind of partnership.
Business Partnership Advantages
Partnerships are fairly inexpensive and straightforward to set up. The most time consuming part of establishing a partnership is drawing up the partnership agreement.
One of the biggest advantages of a partnership is the way that the company’s taxes are managed. Partnerships don’t pay income taxes; instead, the company’s gains and losses are passed down to the partners, who claim their respective shares on their personal income tax returns. The company still has to file a tax return to report its income and losses, but the responsibility to pay taxes on that income falls on the individual partners.
In a general partnership, where all of the partners have an equal stake in the company, there’s a sense of shared financial commitment unlike other types of business structures. Because all partners are equally invested in the company financially, they’re also equally dedicated to seeing the company succeed. After all, more money for the company means more money for the partners—when the company wins, everyone wins.
In addition, with multiple parties being responsible for the company’s funding, you’re increasing your opportunities to secure capital. If you have three partners in your company, and each of you obtain individual lines of credit from lenders, you’ve tripled the amount of startup capital you have at your disposal.
The best partners are the ones that have skills that complement one another. When a group of partners bring all of their unique strengths and expertise to the table, the company benefits from the well-roundedness of the team that’s running it.
If you’re starting a company and want to make an informed decision about the best type of business to suit your needs, contact the tax professionals at JRH & Associates at (516) 794-5752 for answers to all your questions.