The downside of partnerships in New Jersey

On Behalf of | Feb 19, 2015 | Civil Litigation

Although the partnership is a common business structure due to the ease of formation, there are some disadvantages to choosing this structure. First, all partners are exposed to an unlimited amount of liability. This means that all partners may have personal assets taken to cover the debts of the company. One possible way to overcome this issue is for both parties to form corporations that then engage in a partnership.

In addition, the partnership structure may be considered inflexible and unreliable. If one partner dies, it generally means the end of the partnership regardless of what the others want to do. It may also be impossible to transfer ownership in a partnership unless all parties agree to that transfer. Therefore, it could be difficult to exit a partnership or buy out other parties when a disagreement occurs.

A final issue that needs to be considered with partnerships is that everyone is equally in charge of the company. If one partner agrees to a contract, all the other partners are bound by that agreement. It could lead to a partnership being liable for debts or bound to agreements that not all parties feel are in their best interest. However, as all partners have authority to make deals, there is nothing stopping them from doing so without telling others beforehand.

If a company is dealing with employment or partnership disputes, it may be worthwhile to talk to a business law attorney. He or she may be able to review existing contracts or other agreements to determine how to resolve the issue. While it may be necessary to go to court to resolve some of the disputes, it might be possible to resolve them through mediation or informal negotiations.

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