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Our last blog post looked at sole proprietorships. Today we’ll examine general partnerships.
General partnerships are formed by default without any formalities when two or more individuals agree to conduct business jointly for a profit. Each partner is personally liable to business creditors, no matter which partner entered into the debt. Each partner can have designated responsibilities and designated financial liability, depending on how the partnership is structured.

Although no formalities are required to form a partnership, we highly recommend a written partnership agreement. As with the sole proprietorship, a partnership should use adequate insurance to mitigate personal risks.

From a tax perspective, a partnership is not a separate tax entity. Partnerships file an annual informational return (reporting all income, deductions, gains and losses) on behalf of the business; but all profits and losses are passed through directly to the partners and are reported on their respective tax returns. Partners are not employees of the company and must be supplied with a K-1 by the company each year.

Tags: Choice of Entity, insurance, K-1, partnership, sole proprietorship, Taxation

This entry was posted on Monday, October 5th, 2009 at 12:36 pm and is filed under business law. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.