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Categories: General Tax Terms

Partnerships

A partnership is a business structure in which two or more individuals share ownership and management responsibilities. In a partnership, each partner contributes capital, expertise, or labor to the business and shares in its profits, losses, and liabilities.

There are several types of partnerships, including:

  1. General Partnership: All partners share equal responsibility for managing the business and are personally liable for debts and obligations.

  2. Limited Partnership (LP): Comprises general partners who manage the business and have unlimited liability, and limited partners who invest capital but have limited liability and typically do not participate in management.

  3. Limited Liability Partnership (LLP): Similar to a general partnership, but it offers protection to partners from personal liability for certain business debts and obligations, making it a popular choice for professional groups like law and accounting firms.

Partnerships are often formed through a partnership agreement that outlines the roles, responsibilities, profit-sharing arrangements, and procedures for handling disputes or the departure of a partner.

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