From a taxation point of view partnerships are often used for income-splitting purposes. The disadvantages Disadvantages associated with partnerships include such things as determining profit share, personality clashes, disagreements over the administration and organisation of the business, differences regarding the promotion and growth of the business. A partnership structure is very similar to that of a sole proprietor so far as personal liability is concerned. A partnership is not a separate legal entity, separate from the individual partners. Partners are personally liable for all the debts and losses of the partnership to the full extent of their personal assets.
Partners are legal agents for each other.
Choose your partner or partners carefully. It is important to set out the rights and duties of the partners in a partnership agreement. Whatever the size of the business it is unwise to rely on verbal arrangements, the existence of which at some later stage you may have to prove. For example, the Partnership Act provides that partners are entitled to equal shares in income and in capital and are equally entitled to engage in management of the partnership. Each partner must then include his or her income from the partnership in his or her return and be assessed accordingly.