What are the disadvantages to author partnerships?

March 5th, 2015 → 1:23 am @ // No Comments

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First of all, I wanted to say that I enjoy your website. Very informative.
My sister and I want to write books together for a long term, however on one of your post you said that you do not recommend partnerships. We wanted to start a partnership to separate profits from our personal account. I have several of my own books and I don’t want to get confused when sorting out the payments. What are the main reasons I shouldn’t be in partnership?

Dee

 

Dee,

Good questions. Here are the disadvantages of forming an author partnership:

  • Unlimited liability. General partners are liable without limit for all debts contracted and errors made by the partnership.
  • Each partner is ‘jointly and severally’ liable for the partnership’s debts; that is, each partner is liable for their share of the partnership debts as well as being liable for all the debts
  • If the business becomes indebted and insolvent, a partners’ personal assets might be needed to cover the debts.
  • Profits must be shared with your partners, even if you do most of the work. Partners need to decide how to value each others’ time and skills. What happens if one partner puts in less time?
  • Decisions are shared. You have to consult your partner and cannot make decisions by yourself.
  • Disagreements can happen making family gatherings very awkward.
  • There can be vagueness of each partner’s responsibilities
  • There is no hierarchy of authority. No one gets final authority.
  • All partners can act on behalf of the partnership. One partner can enter into contracts and bind the partnership to agreements.
  • A partnership is for the long term. Expectations and situations can change, which can lead to dramatic and traumatic split ups.
  • If a partner decides to leave, you will probably have to buy out their portion of the partnership so that you can continue the partnership as a business. This means hiring a CPA with an expertise in business valuations to determine the value of the partnership.
  • The tax return for a partnership is much more complicated than a sole proprietorship tax return, meaning you’ll need to hire a CPA to do the tax return.
  • You need a formal, written partnership agreement, so you’ll need to hire an attorney.

and finally, you should be aware of the complications of joint copyright ownership. From attorney Francine Ward, “A joint owner of a copyrighted work has an undivided, equal interest with the other joint owners. What that means is each copyright owner shares equally in all profits generated by the copyrighted work.”

So that gives you a lot to think about!

Carol Topp, CPA

Sources:

http://www.how-to-start-a-business-guide.com/partnership-advantages.html

http://www.business.tas.gov.au/starting-a-business/starting-a-business-from-scratch/choosing-a-business-structure-intro/partnership-advantages-and-disadvantages

http://smallbusiness.findlaw.com/incorporation-and-legal-structures/what-are-the-disadvantages-of-partnerships.html

http://francineward.com/copyright-owner-ownership-rights-joint-copyright-2/


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