Partnership.
In plain English
A partnership is a business two or more people own together. In a general partnership, all partners share management and are personally responsible for the business debts. In a limited partnership, some partners invest but stay out of daily operations and limit their liability to what they put in. Partnerships do not pay income tax themselves; profits and losses pass through to the partners, who report their share on their personal returns. A written partnership agreement, though not always legally required, sets out who does what and who gets what, which prevents most partner disputes.
01Why it matters
A partnership is easy to start but ties your personal finances to a co-owner's decisions and the business debts, so understanding the liability is essential before you form one.
02The math, step by step
Two friends open a bakery as a general partnership. They split the profits, but each is also personally liable for the full business debt, so if the bakery owes 30,000 dollars, a creditor can pursue either partner for all of it.
03What this is NOT
A general partnership is NOT an LLC or corporation. It gives its owners no liability shield, so partners are personally responsible for business debts, unlike the owners of an LLC or corporation.
04Receipts
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