Financial Accounting I

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General partnership

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Financial Accounting I

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?
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