Partners

Definition

Partners are individuals or entities who jointly own and operate a business in a partnership structure. They share profits, losses, and management responsibilities according to the partnership agreement.

5 Must Know Facts For Your Next Test

1. Partners have unlimited liability for the debts of the partnership.
2. Profits and losses are shared among partners based on their agreed-upon ratio.
3. Each partner has equal rights in the management of the business unless otherwise specified in the partnership agreement.
4. Partnerships do not pay income tax; instead, profits and losses pass through to the individual partners' tax returns.
5. A new partner can be admitted only with the consent of all existing partners.

Review Questions

• What is the primary financial liability associated with being a partner?
• How are profits typically distributed among partners in a partnership?
• What must happen for a new partner to be admitted into an existing partnership?

Related terms

General Partnership: A type of partnership where all partners share equal responsibility for managing the business and are personally liable for its debts.

Limited Partnership: A partnership with at least one general partner who manages the business and is personally liable, and one or more limited partners who contribute capital but have limited liability.

Partnership Agreement: A legal document that outlines the rights, responsibilities, profit distribution, and other terms agreed upon by the partners.