A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits.
There are several types of partnership arrangements. In particular, in a partnership business, all partners share liabilities and profits equally, while in others, partners may have limited liability. There also is the so-called "silent partner," in which one party is not involved in the day-to-day operations of the business A partnership is an arrangement between two or more people to oversee business operations and share its profits and liabilities.
In a general partnership company, all members share both profits and liabilities.
Professionals like doctors and lawyers often form a limited liability partnership.
There may be tax benefits to a partnership compared to a corporation.
Types of Partnerships
In a broad sense, a partnership can be any endeavor undertaken jointly by multiple parties. The parties may be governments, nonprofits enterprises, businesses, or private individuals. The goals of a partnership also vary widely.
Within the narrow sense of a for-profit venture undertaken by two or more individuals, there are three main categories of partnership: general partnership, limited partnership, and limited liability partnership.
General Partnership
In a general partnership, all parties share legal and financial liability equally. The individuals are personally responsible for the debts the partnership takes on. Profits are also shared equally. The specifics of profit sharing will almost certainly be laid out in writing in a partnership agreement.
When drafting a partnership agreement, an expulsion clause should be included, detailing what events are grounds for expelling a partner.
Limited Liability Partnership
Limited liability partnerships (LLPs) are a common structure for professionals, such as accountants, lawyers, and architects. This arrangement limits partners' personal liability so that, for example, if one partner is sued for malpractice, the assets of other partners are not at risk.
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Some law and accounting firms make a further distinction between equity partners and salaried partners. The latter is more senior than associates but does not have an ownership stake. They are generally paid bonuses based on the firm's profits.
Limited Partnership
Limited partnerships are a hybrid of general partnerships and limited liability partnerships. At least one partner must be a general partner, with full personal liability for the partnership's debts. At least one other is a silent partner whose liability is limited to the amount invested. This silent partner generally does not participate in the management or day-to-day operation of the partnership.
Finally, the awkwardly-named limited liability limited partnership is a new and relatively uncommon variety. This is a limited partnership that provides a greater shield from liability for its general partners.
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Taxes and Partnerships
There is no federal statute defining
3. BASICS
Partnership : A partnership is a formal arrangement by two or more parties to
manage and operate a business and share its profits.
Types of Partnership 1.Compound Partnership
2.Simple Partnership
4. BASICS
Simple Partnership :
A simple partnership is one in which each of the partners invests a capital sum for the
same time. During the tenure of the partnership, all the partners stay.
Suppose A and B invests Rs X and Rs Y respectively for a year, then at the end of the
year,
𝐴 ’ 𝑠 𝑠 ℎ 𝑎 𝑟 𝑒 𝑜 𝑓 𝑃 𝑟 𝑜 𝑓 𝑖 𝑡 ∶ 𝐵 ’ 𝑠 𝑠 ℎ 𝑎 𝑟 𝑒 𝑜 𝑓 𝑝 𝑟 𝑜 𝑓 𝑖 𝑡 = 𝑋 ∶ 𝑌
5. BASICS
Compound Partnership :
When partners invest money for different time periods, the partnerships are what we call
the compound partnerships.
Suppose we have two partners A and B who invest an amount of ‘x’ and ‘y’ respectively.
Let the partner A be in the partnership for a time of ‘a’ and let ‘b’ be the time for which the
partner B stays in the partnership.
𝐴 ’ 𝑠 𝑠 ℎ 𝑎 𝑟 𝑒 𝑜 𝑓 𝑃 𝑟 𝑜 𝑓 𝑖 𝑡 ∶ 𝐵 ’ 𝑠 𝑠 ℎ 𝑎 𝑟 𝑒 𝑜 𝑓 𝑝 𝑟 𝑜 𝑓 𝑖 𝑡 = 𝑋 ( 𝑎 ) ∶ 𝑌 ( 𝑏 )
6. BASICS
Suppose A, B and C are three partners who invest C1, C2and C3capital for T1, T2and T3time
period
respectively,
A ∶ B : C
𝑅 𝑎 𝑡 𝑖 𝑜 𝑜 𝑓 𝐶 𝑎 𝑝 𝑖 𝑡 𝑎 𝑙 C 1 ∶ 𝐶 2 ∶ 𝐶 3
𝑅 𝑎 𝑡 𝑖 𝑜 𝑜 𝑓 𝑇 𝑖 𝑚 𝑒 T 1 ∶ 𝑇 2 ∶ 𝑇 3
𝑅 𝑎 𝑡 𝑖 𝑜 𝑜 𝑓 𝑃 𝑟 𝑜 𝑓 𝑖 𝑡 C 1 T 1 ∶ 𝐶 2 𝑇 2 ∶ 𝐶 3 𝑇 3
7. BASICS
Suppose A, B and C are three partners who invest C1, C2and C3capital and earned profit P1,
P2 and P3 respectively,
8. BASICS
Suppose A, B and C are three partners who invest T1, T2and T3capital and earned profit P1,
P2 and P3 respectively,
9. BASICS
Working Partner / Active Partner :
Working Partner means an individual who is a Partner of the Firm and is actively engaged
in conducting the affairs of the business or profession of the Firm.
Sleeping Partner / Silent Partner :
A sleeping partner is a colloquial term for a person who provides some of the capital for a
business, but doesn't take an active part in managing the business.
