What is Partnership
It is a pattern of arrangements in which two or more individuals share ownership of a business where they put their skills, finance and other resources.
"Partnership is a relation existing between persons competent to make contracts, who agree to carry on a lawful business in common with a view to private gain"- PROF.HANEY
Partnership agreement is made up of the relationship between the partners, the percentage, type of ownership, and the duties of partners. Partners maybe active participation in running the business or passive investors, each partner "buy in" or invest in the business, share the profit and losses base on his or her percentage share of ownership.
Types of partnership
General Partnership
A general partnership is a partnership with only general partners. Each general partner must actively participate in managing the business and any partner may sign a contract on behalf of the partnership. The partners must agree to major decisions, acting as a corporate board of directors.
Because general partners actively participate, they all must take personal responsibility for the liabilities of the business and for debts incurred by other partners. If one partner is sued, all partners are held liable. A partner's personal assets may be taken by a court or creditor. General partnerships are the least desirable for this reason.
Limited Partnerships
A limited partnership includes both general partners and limited partners. In many cases, there is one general partner who manages the business and a number of limited partners. A limited partner does not participate in the day-to-day management of the partnership and his/her liability is limited to his investment in the business
In many cases, the limited partners are merely investors who do not wish to participate in the partnership other than to provide capital and to receive a share of the profits. Because limited partners don't participate in management, they are considered passive investors. This means they can't take partnership losses off their income tax return if they don't have other income to offset it.
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