Partnership

A partnership is an association of two or more people who operate a business as co-owners. There are different types of partners. A general partner is active in the operation of a business and is liable for all of its debts.


In small businesses with only two or three owners, all typically will be general partners. A limited partner, by contrast, invests in a business but is not involved in its daily operations. Partnerships, like sole proprietorships, are relatively easy to establish.


Furthermore, partners can pool financial resources to fund expansion and can divide their duties and responsibilities according to personal expertise and abilities. For example, one partner may be very good at selling, while another has a knack for maintaining good financial records.


As with sole proprietorships, however, partnerships may entail substantial financial risks, as all of the general partners are liable for the debts of the business. And unlike proprietorships, disagreements among partners can harm partnership businesses.