What is a Partnership?
A Partnership is a legal form of business operation conducted between two or more individuals who share responsibility for the management, profits and losses of a business.
How many partners can be in a partnership?
There must be at least two or more partners within the partnership, and there is no limit to how many partners you can have in a partnership.
Advantages of a Partnership
- Easy to establish
- Uncomplicated tax structure: partnerships are not taxed as their own entity, each partner is responsible for the profits and losses of the business and each files an individual tax return
- Two brains are better than one: with each partner, you have access to more skills, knowledge, and an increased ability to raise funds for the business
Disadvantages of a partnership?
- Personal liability: general partners are responsible entirely for all business profits and debts formed by the partnership
- Profits are shared equally depending on the initial contract agreement: this can essentially lead to inconsistency where one or more of the partners is not putting in a fair share of the efforts but is however still receiving reoccurring rewards from the business
- Unclear authority and vagueness of each partner’s responsibility can result in disagreements or conflict
What do I need to do to register a partnership?
To register a new business as a partnership the below registrations are typically required:
- DBA (Fictitious Business Name)
- Business License (Tax Registration Certificate)
- Tax ID # (EIN)