A partnership consists of two or more people who own and run the business. The partnership may be general or limited and is generally governed by an agreement that sets forth the partners' responsibilities and obligations.
Limited liability partnerships (LLP) may be an option depending on your state. LLPs may be limited to certain professions, as in California, and provide some protection to the partner from personal liability for certain acts of the other partners.
In a partnership:
- Partners are personally liable for the partnership's obligations in a general partnership.
- Partners owe fiduciary duties to each other.
- Taxes are paid through the partner's individual tax returns.
The benefits of a partnership, says the SBA, include low formation costs, profits that flow through to the partners, and incentives for employees to become partners, while the downside includes joint and several liabilities, profit sharing, and disputes between partners over business decisions.