Legal Entities in Optometry: The General Partnership

In a previous post, we emphasized the role of sole proprietorship in Optometry among other legal entities. A sole proprietorship is when one Optometrist owns and runs the business. However, a partnership appears when two or more persons own and engage in the business; it can be a general or limited partnership. In the case of a general partnership, the business assets are owned by all partners and together they are personally liable for the business obligations and debts. A limited partnership is a form of hybrid partnership with both limited and general partners.

The advantages of a partnership include:

A partnership does not pay taxes on its own, but taxes are passed through to the partners and each partner is responsible to report income and pay taxes on his individual tax return.

A partnership produces and processes a higher work volume and patient load than a sole proprietorship. Therefore, it generates higher earning and potentially higher individual returns and income.

Capital invested in the practice is divided among partners. Practice overheads, as well as fixed and variable costs and expenses, are shared among partners.

A partnership enables extended opening hours and more convenience to patients. This is due to the increased availability of partners Optometrists and different shifts possibility.

Each partner’s investment in the practice is an investment in equity that does not lose its value in case the partner stops working as a result of retirement, or a health issue.

The disadvantages of a partnership include:

The number one disadvantage of a partnership compared to a sole proprietorship is that the co-owner optometrist will lose independence and full control over the decisions and operations in the business. All decisions are made in a collective way.

Sometimes if activities are not well distributed, conflicts may arise among Optometrists for differences in workload, income distribution inequality, and vacation or absence gaps. Moreover, all partners are equally responsible and liable for a mistake that any partner made.

Partnership are more expensive than sole proprietorship in terms of legal and establishing expenses as well as accounting services fees.