Partnership

Partnership

A partnership is an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations may partner to increase the likelihood of each achieving their mission and to amplify their reach. A partnership may result in issuing and holding equity or may be only governed by a contract.

Types of partnerships

There are three general types of partnership arrangements:

• General Partnership (GP): All partners manage the business and are liable for its debts. Each partner has unlimited liability for the debts incurred by the business. The three typical scenarios for a general partnership are: (1) all profits, tax deductions, and financial/legal liability are divided equally among the partners; (2) if not equally, then in accordance with percentages documented in the partnership agreement.
• Limited Partnership (LP): Some partners are general partners that manage the business and have unlimited liability, but other partners are limited partners that contribute capital and share in profits but take no part in running the business and have limited liability.
• Limited Liability Partnership (LLP): All partners have limited liability for the business's debts and one partner cannot be held liable for the debts of another partner. An LLP is a partnership for legal and tax purposes.

Formation

The formation of a partnership requires a voluntary "association" of persons who "co-own" the business and intend to conduct the business for profit. Persons can form a partnership by written or oral agreement, and a partnership agreement often governs the partners' relations to each other and to the partnership.

See also

• Corporation
• Sole proprietorship
• Cooperative
• Company
• Limited liability company

Partnership Resources
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