The term partnership is used to describe an unincorporated business entity that is owned by two or more persons. Partners own assets together, share in the business profits or losses, and are typically jointly liable for debts, legal actions, and the payment of taxes.
A partnership is a voluntary arrangement between two or more persons owning a business. The partnership agreement usually specifies how the profits or losses of the business will be distributed to all of the partners each year.
As is the case with sole proprietorships, a partnership is often used for small businesses including retail stores and professional practices such as accounting, financial advisors, law and medical offices. Each partner has an equal right to manage the business operations. The owners of a partnership are personally responsible for all liabilities and debts incurred by the business. Personal assets of the owners can be liquidated to repay the debts of the partnership.
Partnerships usually terminate when a partner passes away, becomes disabled, or otherwise withdraws from the business. The partnership agreement usually indicates the settlement rules in the event a partner leaves the company.