Partnerships in business: pros, cons and AU legal structures
Going in with a partner can double your capital and skills — or destroy a friendship and your savings. What to weigh up, plus a plain-English look at AU partnership structures.
The case for partnering
Shared capital reduces personal risk and increases purchasing power.
Complementary skills (one operator, one finance/marketing) plug gaps.
Shared workload makes burnout less likely in the brutal first 24 months.
Decisions get a sanity check before they're made.
The case against
Disagreements about money, hours and direction are inevitable. ~70% of business partnerships in studies end in disputes.
In a general partnership, each partner is jointly and severally liable — your partner's bad decision can cost you personally.
Profit is split. A business that comfortably supports one owner may not support two families.
Exit is harder. Buying out a partner mid-fight is expensive and emotionally draining.
AU structures at a glance
General Partnership: simplest and cheapest, but unlimited personal liability for all partners. Avoid for anything with material risk.
Limited Partnership (LP): some partners' liability is capped to their investment. Used for passive investors.
Company with multiple shareholders: most common modern path. Liability is limited to the company. Use a Shareholders' Agreement to define decisions, drag/tag rights, and exit.
Unit Trust with corporate trustee: tax-flexible structure for partnership-style ownership, common in professional services and property.
Non-negotiables before you sign
A written Shareholders' / Partnership Agreement covering: capital contributions, profit split, decision thresholds, dispute resolution, death/incapacity, and exit triggers.
Pre-agreed buy-sell mechanics so a divorce doesn't require a court.
Separate legal advice for each partner — never share a lawyer.
Insurance: key person, business interruption, public liability.
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