What is Foolsaurus?

It's a glossary of investing terms edited and maintained by our analysts, writers and YOU, our Foolish community.


A partnership is a business organization under which two are more people share in the ownership of a business or other venture.

Expanded Definition

Although many partnerships are formed by a handshake, attorneys recomend a partnership agreement. The agreement spells out what assets each partner contributed to the partnership in return for what percentage of the profits. The agreement often clarifies how decisions will be made, how the partnership may be dissolved, and aspects like the death or disability of a partner.

Incorporation is often a preferred organization, because each partner is liable for the debts of the partnership. However, some states allow the creation of limited liability partnerships.

Partnerships issue K-1 forms which allocate the profits of the partnership to the partners. The partners then pay income taxes by including their share of profits in their personal income tax returns.

Related Terms

Recent Mentions on Fool.com