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Partnership
Businesses or business entities which are formed under partnership partners share with each other the profits or losses of the business undertaking in which they have all invested. If your home business has two or more people interested then this structure could suit you.
While considering the types of partnership, generally, there are two types of partners: general partners and limited partners. General partners have an obligation of strict liability to third parties injured by the Partnership. The liability of limited partners is limited to their investment in the partnership.
Partnership too has several characteristics which need to be clearly understood before settling for this structure. These again would depend on the resources at you disposal. The following points illustrate few of the characteristics of partnership
Characteristics
- This structure has two or more co-owners engaged in business for profit. For the major part, the partners own the business assets together and are personally liable for business debts
- With regard to profit sharing, in the absence of a partnership agreement, profits are shared equally amongst the partners. A partnership agreement, however, usually provides for the manner or arrangement in which profits and losses are to be shared
- Each Partner is, jointly and severally, personally liable for debts and taxes of the partnership. For example, if the partnership assets are insufficient to satisfy a creditor's claims, the partners' personal assets are subject to attachment and liquidation to pay the business debts.
- Each general partner is deemed the agent of the partnership. Therefore, if that partner was apparently carrying on partnership business, all general partners can be held liable for his dealings with third persons.
- Each partner may be held jointly and severally liable for a co-partner's wrongdoing
- Technically, a partnership terminates upon the death, disability, or withdrawal of any one partner. However, most partnership agreements provide for these types of events with the share of the departed partner being purchased by the remaining partners in the partnership.
- In the absence of a partnership agreement, each general partner has an equal right to participate in the management and control of the business. Disagreements in the ordinary course of partnership business are decided by a majority of the partners.
- Unless otherwise provided in the partnership agreement, no one can become a member of the partnership without the consent of all partners. However, a partner may assign his share of the profits and losses and right to receive distributions
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