Partnerships

A general partnership is an association of two or more persons to carry on as co-owners a business for profit. A formal written partnership agreement is not necessary to create a general partnership, but is strongly recommended.

Management: In a small general partnership, generally all general partners have an equal voice in the management of the partnership. In larger partnerships, the partners may agree to delegate the management of the partnership to one or more of the general partners.

Liability: All general partners have joint and several liability for the business obligations of the partnership. This is one of the main drawbacks of doing business as a general partnership. As with sole proprietorships, adequate liability insurance coverage must be in place to provide some protection to the general partners.

Taxation: The partnership is a "pass-through entity" in that each partner reports his or her respective share of income or loss on his or her own tax return. Partnership income will be taxed to the partners even if the income is not distributed to the partners.

Continuity: A general partnership continues until the date set forth in the general partnership agreement or until dissolution in accordance with specific events detailed in the partnership law, such as the death or bankruptcy of a general partner.

Transferability: The partnership agreement and the provisions of the partnership law govern when and how a partnership interest may be transferred. The transferability is generally restricted.