General Partnership

Overview

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  • A partnership is an association of two or more persons to carry on as co-owners a business for profit; the persons may be individuals, corporations, limited liability companies, or other partnerships.
  • If two or more individuals start a business together with the understanding that each will share in the profits of the enterprise, they are considered a general partnership even if they didn't specifically intend to start a general partnership. 
  • For federal tax purposes, there are no restrictions on who can be a partner in a partnership.  Thus, individuals, estates, trusts, corporations, foreign persons, and tax-exempt entities can all be partners for federal tax purposes. 
  • A general partnership does not offer the partners any limited liability protection for their personal assets. A judgment against the partnership generally allows a creditor or claimant to go after the assets of the partnership and all partners to satisfy a judgment.
  • Although a general partnership can be formed without the need for a written agreement, such an agreement can provide significant protection with respect to, for example, the division of profits and losses of the enterprise, the ability of a partner to engage in other business activities, and the terms and conditions of termination of the enterprise or the withdrawal of a partner.


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