A partnership in a business is similar to a personal partnership. Both business and personal partnerships involve:
- Pooling money toward a common purpose
- Sharing individual skills and resources, and
- Sharing in the ups and downs of profit and loss.
A business partnership is a specific kind of legal relationship formed by the agreement between two or more individuals to carry on a business as co-owners. A partnership is a business with multiple owners, each of whom has invested in the business. Some partnerships include individuals who work in the business, while other partnerships may include partners who have limited participation and also limited liability for the debts and lawsuits against the bussines.
A partnership, as different from a corporation is not a separate entity from the individual owners. A partnership is similar to a sole proprietor or independent contractor business because in both of these businesses the business isn’t separate from the owners, for liability purposes.
The partnership income tax is paid by the partnership, but the profits and losses are divided among the partners, and paid by the partners, based on their agreement.
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