Partnership

A partnership is like a sole proprietorship for a few people. Wikipedia, the free, on-line encyclopedia describes a partnership as

a type of business entity in which partners (owners) share with each other the profits or losses of the business undertaking in which all have invested. Partnerships are often favored over corporations for taxation purposes, as the partnership structure does not generally incur a tax on profits before it is distributed to the partners (i.e. there is no dividend tax levied). However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as shareholders of a corporation.

For myself, I would never enter into a standard partnership. Each partner is fully liable for all the debts of the partnership. If you partner empties out your bank account and scams off to Aruba or somewhere there's no extradition treaty with the US, you're on the hump.

Anyone thinking of forming a partnership should contact an attorney. Also, don't consider forming a partnership with people you don't know well. It's like getting married. They're easy to get into but messy to get out of.

And make sure you have a good partnership agreement. That agreement will specify how you will handle certain situations. What if one of your partners becomes incapacitated or, worse, dies? What if he or she decides to leave the business? What if you want to take on new partners? What happens if you decide to dissolve the partnership? Who is contributing what assets to the partnership and what proportion of the partnership's revenues does each partner get?

And talk to an accountant. He may have a different take on things than an attorney because he's looking at a different side of your business.

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