What is a partnership?
A partnership is a type of business formed by two or more individuals in which the ownership, liability, management, profit and loss are shared.
The three types of partnership are general partnership, limited partnership and limited liability partnership.
Where have you heard about partnerships?
Partnerships are a popular form of company to incorporate and some huge brands started out as partnerships, including Twitter, Google, Apple, Microsoft and Warner Bros.
What you need to know about partnerships.
The differences between the three types of partnership are as follows:
General partnership – the liability, management and profit of the company is shared equally between the partners.
Limited partnership – one general partner manages the company and accepts personal liability while the other partner(s) are not involved in the day-to-day operations and their liability is limited to their investment.
Limited liability partnership – there is no general partner and all the partners have limited liability.
One of the biggest benefits of a partnership is the way it is taxed. Rather than pay corporate income tax as a company, each of the partners files their own personal tax return on the income they receive from the company and this is taxed accordingly. This avoids double taxation on the company profits and the partner dividends.
The legalities about setting up a partnership vary with country and US state, so it is wise to check incorporation regulations.
Find out more about partnerships.
Learn about other types of company, including limited liability companies and corporations with our definitions.