A business partnership is a legal relationship between two or more people who agree to share the profits and losses of a business. Partnerships are often formed by people who have complementary skills and resources, and who believe that they can achieve more together than they could on their own.
There are two main types of business partnerships: general partnerships and limited partnerships. In a general partnership, all of the partners are personally liable for the debts and obligations of the business. In a limited partnership, at least one partner is a limited partner, who is not personally liable for the debts and obligations of the business.
Partnerships offer a number of advantages, including:
- Shared resources: Partners can pool their resources, such as money, skills, and experience, to create a stronger business.
- Shared risk: Partners share the risks of the business, both financially and legally. This can be a major advantage, as it can help to reduce the risk of financial loss for any one partner.
- Shared decision-making: Partners can share in the decision-making process, which can lead to better decision-making.
- Shared rewards: Partners share in the profits of the business, which can be a major incentive for partners to work hard and succeed.
However, partnerships also have some disadvantages, including:
- Potential for conflict: Partners may have different ideas about how to run the business, which can lead to conflict.
- Difficult to dissolve: Partnerships can be difficult to dissolve, especially if there is conflict between the partners.
- Liability: Partners are personally liable for the debts and obligations of the business, even if they were not involved in the decision that led to the debt or obligation.
Overall, partnerships can be a good way to start a business. However, it is important to carefully consider the advantages and disadvantages of partnerships before deciding whether or not to form one.
A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it “passes through” any profits or losses to its partners. Each partner includes his or her share of the partnership’s income or loss on his or her tax return.
Partners are not employees and should not be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partners by the date Form 1065 is required to be filed, including extensions.
If you are a partnership or a partner (individual) in a partnership, use the information in the charts below to help you determine some of the forms that you may be required to file.