Partnership | Tuesday January 13th, 2004 | |
A partnership involves two or more persons who carry on a trade or business. Each person contributes money, property, labor, or skill, expects to share in the profits and losses, and carries on as a co-owner of the business. A partnership can be formed by oral agreement between two or more persons, but a legal partnership agreement is highly recommended. Just like sole proprietorships, no formal paperwork is required unless the partnership will be doing business under a trade name or a DBA. Check with the city or county government where the business is located for appropriate filing requirements. Since partners are co-owners, they share financial and management control. The partners are personally liable for any debts incurred by the business. In general, death or withdrawal of any partner terminates the partnership unless there's agreement among the partners. Partnership is not a taxable entity. Each partner includes his or her share of the partnership's income or loss on his or her tax return.
Variations
Limited partners have limited personal liability for claims against the business. However, they are not involved with the management or operation of businesses. They have no control over the business. Most states required filing of formal agreement for a limited partnership.
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