Partnerships

In a partnership, two or more people share ownership of a single business. The law does not distinguish between the business and its owners. A partnership The partners should have a partnership agreement that sets forth the following:

• How much capital each partner will contribute and what their continuing obligations are to fund the partnership.
• How decisions will be made (is the agreement of both partnership members required for everything?);
• How profits and losses will be shared;
• How partnership disputes will be resolved;
• How partners can sell their interest and/or be bought out by the other partner; and
• How the partnership could be dissolved.

A partnership agreement is similar to the operating agreement of an llc and the bylaws of a corporation.

Advantages of a Forming a Partnership

• Partnerships can be established easily. However, a good partnership agreement is needed.
• The profits and losses of the business flow directly to the partners’ personal tax returns.

Disadvantages of a Partnership

• Partners are jointly and individually liable for the actions of the other partners.
• The absence of a good partnership agreement can be problematic.
• Partners are personally liable for the debts and obligations of the partnership.

LLCs provide the advantages of partnership (pass-through profits and losses) plus limited liability for the debts and obligations of the business.

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Types of Partnerships

1.General Partnership

In this partnership model, partners divide everything equally like management, profits, losses, etc. A general partnership can have an agreement which divides things less than 50/50.

2.Limited Partnership

A limited partnership is one in which partners’ liability is limited to the to extent of their investment. These partners are also limited in their participation in the management of the partnership.

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