Partnership

Definition

A partnership is a business structure where two or more individuals share ownership, responsibilities, and profits. Each partner contributes to the business and shares in its income and liabilities according to agreed terms.

5 Must Know Facts For Your Next Test

1. In a partnership, profits and losses are typically shared among partners based on their agreement.
2. Partners in a general partnership have unlimited liability for the debts of the business.
3. Limited partnerships include both general partners (who manage the business) and limited partners (who invest but do not manage).
4. Partnerships are relatively easy to establish compared to corporations, with fewer formalities required.
5. Dissolution of a partnership can occur if one partner withdraws, dies, or if there is an agreement to terminate the partnership.

Review Questions

• What differentiates a general partner from a limited partner in a limited partnership?
• How are profits typically distributed in a partnership?
• What are some reasons that might lead to the dissolution of a partnership?

Related terms

Corporation: A legal entity that is separate from its owners, offering limited liability protection to its shareholders.

Sole Proprietorship: A business owned and operated by one individual, with no distinction between the owner and the business entity.

Joint Venture: A temporary arrangement between two or more parties for the purpose of executing a particular business project or activity.