Partnership

Simply stated, a Partnership is a specific form of business organization in which each of the partners shares in the revenue and each is liable for 100% of the debts of the company.

There are lots of different kinds of partners like limited partners and general partners and managing partners but that's for larger organizations with investors. But look into it. Wikipedia is a good place to start but don't stop there.

If you don't do anything special but just go into business and start selling stuff on your own you have a sole proprietorship. Most of the time a sole proprietorship is all a person really needs. If you want investors (really?) or to employ people (watch out) or you want the business to outlast your death, you might want to go for something else. It yuse to be you had a standard C corporation, sub-chapter S, or partnership to choose from. Now there's a buch more. LLCs seem to be popular.

The word partnership is often used to mean a collaboration, as in "We're partnering together." To be more accurate a "partnership" is a form of business organization defined above. where two or more people act together in a business and each derives income You should contact an attorney to determine whether you want to be in a partnership. You should also ask an accountant. If you ask Tim Bosworth he's almost always recommend against it.

But, if you do, after talking with your attorney, decide that a partnership is the right way to go, you had better make sure you have a good partnership agreement. This specifies what you're doing, how you're making money, how the revenue is to be accounted for, who is liable for what, and what happens should the partnership agree to go out of business or if one of the partners is unavailable to the partnership because of illness, accident, death, or fraud.

Also, make sure you know the person with whom you're going to form the partnership. Make sure they are trustworthy and will be able to work together. You don't have to be close pals. If you don't know them or they have less than great credit don't go into business with them. If they're that important take them on as an employee or outside vendor with your relationship covered by a good employment agreement and a non-disclosure agreement.

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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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