General partnership

Definition

A general partnership is a business arrangement where two or more individuals share ownership and management responsibilities. All partners are equally liable for the debts and obligations of the partnership.

5 Must Know Facts For Your Next Test

1. General partnerships involve joint decision-making and shared profits among partners.
2. Partners in a general partnership have unlimited personal liability for the business's debts.
3. The formation of a general partnership does not require formal documentation, but a partnership agreement is recommended.
4. General partnerships dissolve upon the death, withdrawal, or bankruptcy of any partner unless otherwise stated in an agreement.
5. Taxation in general partnerships is pass-through, meaning profits and losses are reported on each partner's individual tax return.

Review Questions

• What level of liability do partners in a general partnership have?
• How are profits and losses handled in terms of taxation within a general partnership?
• What can cause the dissolution of a general partnership?

Related terms

Limited Partnership: A form of partnership with at least one general partner with unlimited liability and one or more limited partners with liability restricted to their investment.

Partnership Agreement: A document outlining the terms, roles, and responsibilities among partners in a business arrangement.

Pass-Through Taxation: The process where income is taxed at the individual level rather than at the corporate level.