Modified on 2009/10/14 12:04 by tmkern — Categorized as: Uncategorized
A partnership is a type of business organization. It is owned and operated by two or more individuals, called partners. A partnership is unincorporated. A partnership is not considered a legal entity separate from its owners. The details of the partnership, such as profit and loss sharing and decision-making rights, are stipulated in a contract called a partnership agreement.
There are different types of business partnerships, including
. Depending on the type of partnership, the entity may be privately owned or publicly owned, and the partners may have limited liability or unlimited liability for the activities and obligations of the business.
A partnership dissolves when there is a change in ownership or a change to the original partnership agreement. If any partner dies or leaves the organization, or if any changes are made to the original contract, the entity must dissolve and a new partnership must be formed.
Advantages and Disadvantages
There are several advantages to a partnership. Business partnerships are easy to establish, easy to dissolve and they give the partners a significant amount of operational freedom and flexibility. Also, partnerships do not pay corporate income tax (taxes are paid by the partners at the individual level). And as opposed to a
, a partnership can utilize the capital, entrepreneurial skills, and managerial expertise of more than one individual.
The disadvantages of a partnership include the unlimited personal liability of the general partners and the limited access to capital resources.