A partnership is a business structure in which two or more individuals or entities operate a business together. Partnerships are formed when two or more people come together to run a business and share in the profits and losses of the business.
There are several different types of partnerships, including general partnerships, limited partnerships, and limited liability partnerships:
- In a general partnership, all partners are personally liable for the debts and obligations of the partnership. This means that if the partnership is sued or incurs debt, the partners’ personal assets may be at risk.
- A limited partnership is similar to a general partnership, but it includes one or more partners who are only liable for the partnership’s debts to the extent of their capital contributions. The other partners, known as general partners, have full personal liability for the partnership’s debts.
- A limited liability partnership (LLP) is a type of partnership in which the partners are not personally liable for the debts and obligations of the partnership. This means that the partners’ personal assets are generally not at risk if the partnership is sued or incurs debt. Similar to a limited liability company (LLC), this can offer a layer of protection that the previous types of partnerships don’t.
For most small businesses there is no limit to the number of people who can work together in a partnership, as long as there are at least two partners. Partners don’t even have to contribute the same amount. If they don’t, then their share of the business should reflect what they put into it, whether in time, money or other resources. Partnerships can be complex to manage though. Because it’s an agreement between multiple people, you should always have a written partnership agreement to outline the terms of the partnership and the roles and responsibilities of the partners.
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