According to the most recent statistical information from the Internal Revenue Service, there are nearly 600,000 general partnerships in the United States. Las Vegas entrepreneurs who would like to structure their business ventures as general partnerships, however, should consider not only the benefits of this type of organization, but also its accompanying potential liabilities.
A general partnership is easily created, requiring no written documentation or formal state filings. Because of this, partnerships are popular options for those who would like to get their businesses up and running as quickly as possible.
With this ease of use, however, comes increased liability. The U.S. Small Business Administration notes that there are several disadvantages of general partnerships. For example, in with this business structure, there are no walls between the company’s assets and those of the partners. This means that the personal financial holdings of the partners can be used to collect on debts or claims against the company. Additionally, partnership disputes may arise when the partners share equally in a company’s profit, but not in the work.
Those in general partnerships are also susceptible to breach of fiduciary duty accusations, according to FindLaw. Because partners share in the profits and responsibilities of their businesses, they owe a duty to act in the best interests of one another. If a partner is found to have abused the trust of fellow partners, litigation and monetary damages may result.
Partnerships, like any form of business organization, have advantages and disadvantages. Entrepreneurs should take the time to gain a clear understanding of what type of business structure will work best for their needs. This will help them proactively address any partnership disputes, claims of breach of fiduciary duty and other business litigation issues.