New businesses characteristically fail at an alarming rate. Between 2007 and 2010, the failure rate for U.S. small business rose by 40 percent. Yet, according to the U.S. Small Business Administration, companies with multiple owners are more likely to survive longer than sole proprietorships. What’s more, a 2008 study showed that the average revenues for partnerships increased 157 percent since 1980, while revenues for the average sole proprietor decreased 51 percent during the same period. The study also reported that the average sole proprietor’s net income in 2008 was around $12,000.
The facts seem to make the case for partnerships, yet 72 percent of small businesses are sole proprietorships. Partnerships have their pros and cons, and at first glance, the pros might seem to outweigh the cons. Yet, a partnership gone bad can make you wish you’d never gone into business in the first place.