Starting your own business

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An unincorporated or traditional partnership has similar features to a sole trader business except that there are two or more owners instead of just one.

Whilst bearing both the advantages and disadvantages of other unincorporated entities, there are also some distinct attributes of this type of business vehicle.

As well as owning part of the business, it is typical for each partner to work and mange the operations on a day-to-day basis and then to share in the profits which it generates.

The share of the profit which an individual partner receives will be dependant on the percentage or amount agreed by the business. It is usual for a partnership deed to exist which, among other areas, will stipulate the share of any gains which each will be entitled to.

In practice, the profit split might depend on the length of time the person has been a member of the partnership, how much income the individual person generates or by the level of investment contributed by each.

Unlike limited companies, when one partner leaves or joins the business, that entity is deemed to have been dissolved and another created.

The partnership deed will stipulate the manner in which such events are dealt with.

Partnerships might be viewed as being more favourable compared to sole trader in that with there being two or more owners in the business, it could be argued that their added input might enhance the level of business success.

A partnership might provide a suitable mechanism for another person to be brought in to a new venture. This individual might be an associate providing finance to the start-up business or a person with experience in an area useful to the future plans.

In additional to those disadvantages which relate to sole traders, a partnership will probably require an extensive written agreement to codify the way in which the business relationship between the principles is governed.

There will also be a requirement to specify which actions are needed in the event of numerous possible occurrences such as if one party wishes to exit the business or the parties disagree on a key business issue.

Such agreements are likely to involve time and financial resources to engage solicitors and other profession advisors.

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