A partnership involves combining the capital resources and the business or professional abilities of two or more people in a business. It is a business enterprise entered into for profit which is owned by more than one person, each of whom is a partner. A partnership may be created by a formal written agreement, but can also be established through an oral agreement or just a handshake. Each partner has an agreed percentage of ownership in return for an investment of a certain amount of money, assets and/or effort. Each partner is responsible for all the debts and contracts of the partnership even though another partner may have created the debt or entered into the contract. General partners share in management decisions, and share in profits and losses according to the percentage of the total investment or partnership agreement.
One advantage is that a partnership allows more than one individual to pool financial resources without the requirement of a formal corporate structure and without the expense of organizational fees.
- Each partner has unlimited personal liability for the debts of the partnership.
- The partnership is technically dissolved by the death of a partner, although there is some statutory relief with regard to winding up the affairs of the partnership after the death of one of the partners. A new partnership can then be formed.