Whether you consider each of the characteristics of a partnership to be an advantage or disadvantage will depend on your specific business needs, the industry in which you operate, and your desired level of individual control, flexibility for future changes, taxation arrangements, asset protection requirements and more.

The advantageous characteristics of a partnership are:

• generally inexpensive set up costs, and minimal reporting requirements
• it can be easier to change the structure when circumstances change as compared to a trust or company
• increased borrowing capacity over operations as a sole trader
• the ability to combine different skills, labour, expertise and financial resources of all partners into a multi-disciplinary team
• as with a sole trader, partners are treated as individuals for tax purposes, but income can be more easily split between partners, and any losses from the partnership can offset individual income of each partner
• profits and losses can be varied between partners on an annual basis
• partners can access the 50% Capital Gains Tax (CGT) discount due to the fact that they hold their interest in partnership assets as individuals

The disadvantages of a partnership can include the following issues:

• the liability of partners for debts is usually unlimited (except in a limited partnership arrangement)
• the 'joint and several' liable for debts incurred by the partnership. This means that each partner is not only liable for their share of the partnership debts, but all of the combined partnership debt
• it can be more difficult to transfer a partnership than to transfer shares in a company, for example
• when an asset is sold, each partner is considered to have disposed of an asset for CGT purposes, and any gain from that disposal is treated as income of the individual rather than as the partnership income
• although a partnership is not a legal entity in itself, and does not pay tax, it must still lodge a partnership tax return which shows all income and deductions
• partners are not paid wages and therefore payments to partners can't be treated as 'deductions' for tax purposes
• there can be friction amongst partners who do not agree on a common goal, particularly where unanimous consent is needed for decisions