Easy to form. More sources of collateral for borrowing money than a sole proprietorship. Broader base of experience and expertise than a sole proprietorship. Partners can deduct business losses against income from other sources. Ability to provide partnership as incentive for qualified and loyal employees.
Partners have unlimited liability.
This is important because if one partner exercises poor judgment, that partner can cause not only the loss of the partnership's assets, but also the loss of other partners' personal assets. Authority is divided between partners, which sometimes makes decisions hard to reach. Because the corporation is a legal entity, it pays taxes, enters into contracts, and assumes liabilities. The following pros and cons apply to both types of corporations. The limitations and requirements associated with an S-Corporation are detailed at the end.