John F. answered • 09/03/19
CPA with business report writing experience
A few reasons why a sole proprietor may want to expand his business by accepting a partner maybe she is desiring to ‘organically’ grow the business and could accept more clients by sharing or delegating the new clients to the incoming partner. Another reason may be the existing proprietor is considering an impending retirement and desires to arrange for a ‘buy out’ plan for business succession. Again, another potential reason may be to be able to raise funds via an incoming partnership contribution rather than courting numerous banks for an approved working capital loan.
The disadvantages of becoming a partnership would include assuming the financial and potential tort liabilities of an unknown personality. If the partnership does not appear to function well, the dissolution of a business partnership is seldom neat and clean, rather it can be quite messy and create undesirable & unfounded ripple effects for your business reputation.
The working conclusion will be different for each situation dependent upon one’s expectations, existing skill set, as compared to the similar aspects of the potential incoming partner’s expectations and skill sets. While two or more agreeable personalities could function quite well together the current business climate of the economy expanding or contracting would have to be considered as well.
