People who are involved in businesses in Louisiana will oftentimes be confronted with difficult decisions. In some cases, especially in circumstances involving mergers and acquisitions, these individuals will be faced with the prospect of entering into a brand-new business partnership. However, there can be disadvantages to forming a company with business partners.
One of the most immediate concerns that Louisiana residents will likely have when creating a new business is liability. When a company is based on a partnership, generally speaking, all of the partners will share liability. This is a risk that many people find is worth taking. However, if the company becomes the subject of a lawsuit that asserts liability on the part of the company, the personal assets of the partners may be targeted.
Another drawback to having business partners is that the relationship can become somewhat unstable, in a variety of ways. Say, for instance, that a partnership has been successful and profitable for years, but then one of the partners decides to retire. Can the partnership survive without that individual? Can profits survive? These are questions that might need to be confronted if the partnership veers toward an end.
Finally, even though companies that are formed through a merger or acquisition will usually have detailed documents that delineate what the ensuing company will look like, structurally and organizationally speaking, there could be times when the authority of one person or another might be called into question: a power struggle. Unless it is clear who is supposed to do what, trouble could loom in a business partnership.
Before entering into a partnership, it is important to understand the advantages and disadvantages of this type of business entity. By making an informed choice, business owners wishing to combine forces through a merger or acquisition can choose the business entity that best meets their needs.
Source: FindLaw, “What Are the Disadvantages of Partnerships?,” Accessed Jan. 21, 2017