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Partnership

A partnership is a form of business where two or more people share the ownership of the business. A partnership needs an agreement which defines conditions like how business profits will be divided between the partners, how problems will be solved, how other teammates will be added in the future, how to break up the partnership in a future time.

In a partnership, each individual is liable for debts of the partnership both personally and jointly. No partnership is established to breakup, but the fact is that many partnerships break off during hard times like an economic crisis or a global crisis. Therefore, defining conditions for breaking up the partnership is important for preventing any difficulties that may arise these times.

As in a Sole Proprietorship, individuals who owns the business and the business itself are the same in the eyes of the law in a partnership.

 

Partnership - Pros:

- Like a Sole Proprietorship, a partnership is also easy to form, just the partnership agreement takes some time.
- As in a Sole Proprietorship, business profits in a partnership run straight to the personal tax return of the partners.
- Funding the business is not as hard as in a Sole Proprietorship, more partners mean more chance for funding the business
- A partnership is open to potential business partners as well as employees on the formation stage. This is a deficiency for a Sole Proprietorship, as highly skilled individuals who wants to take part in the business will not be engaged in.
 

Partnership - Cons:

- In partnerships, a partner is jointly and individually responsible for actions of other partners and they are also liable for debts of the partnership.
- In a partnership, partners share business profits with others.
- Some benefits and deductions that other types of businesses have may not be available for a Partnership
- No 'one man show' anymore, decisions are taken together. Possible disputes between partners.
- A partnership will possibly end under resignation of a partner, or when a partner passes over.
 

Tax Forms needed by a Partnership:

Form 1065: Partnership Return of Income
Form 1065 K-1: Partner's Share of Income, Credit, Deductions
Schedule SE: Self-Employment Tax
Form 1040: Individual Income Tax Return
Schedule E: Supplemental Income and Loss
Form 1040-ES: Estimated Tax for Individuals
Form 4562: Depreciation
Employment Tax Forms


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