Partnership

A Partnership is an organization belonging to two or more people in order to achieve an objective. Partnerships are usually created by drawing up a written document called an Article of Partnership, but one can create a partnership by word of mouth. This written document states the roles and responsibilities of each partner and the course of action they will take if they decide to dissolve the business.

Partnerships unlike public limited companies are liable for any debts owed by the firm; this means that if they are unable to pay off their debts, they may have to liquidate the firm’s assets or their own personal assets to cover their debt.

Partnerships have no separate legal entity, therefore in the case of a law suit, the prosecutor sues the partners of the company and not the partnership’s firm name, which unlike public limited companies; shareholders have a corporate veil that protects them from lawful action. There are 3 basic forms of a partnership; general partnership, limited partnership and limited liability partnership.

General partnerships are partnerships in which all partners share the liability and responsibility of the firm. General partnerships are formed by agreement by two or more people. By default, profits are shared equally amongst the partners, all though a legal agreement may determine how the profits or losses are to be shared amongst each partner.

A limited partnership is one similar to a general partnership, the only exception is that where there are two or more general partners, a limited partnership may and can have two or more limited partners. It is one where only one individual is required to be a general partner. Limited partners, like shareholders, have limited liability, meaning that should the partnership incur any debts, the Limited partners are only liable to the extent of the money invested into the partnership. General partners pay limited partners a return on their investment, something like a...