A partnership is a business organization under which two are more people share in the ownership of a business or other venture.
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.
- Income tax
- K-1 Form
- Limited liability company
- Master Limited Partnership
- Private limited partnership
- Royalty trust
- Sole proprietorship
Recent Mentions on Fool.com
- The Top Healthcare Stock to Buy in February
- What's the Best Midstream Company to Buy Today?
- Apple Pay Is More Important Than YouThink
- Should Netflix Inc. and Amazon.com Be Making Movies?
- Charlie Munger: 5 Quotes Show Why Warren Buffett's No. 2 is More Important Than You Think
- ImmunoGen, Inc. Gets Into the Black, Accounting Wise