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General partnership

A general partnership is a form of business organization where two or more people pool their skills, abilities, and resources to run a business and the profits or losses of the business would flow through to the partner’s tax returns. For example, if a business has four general partners and they all have equal ownership in the business, then one-fourth of the profits or losses would flow through to each partner’s individual tax return.

Advantage of a general partnership

  • Creating one is relatively easy and inexpensive compared to a corporation or limited liability company.
  • The skills and abilities of more than one individual are available to the firm
  • Having more than one owner may make it easier to raise funds.
  • Business losses can be deducted against the partners other sources of income.
  • It is not subject to double taxation (explained later).

Disadvantages of a general partnership

  • Liability on the part of each general partner is unlimited.
  • The business relies on the skills and abilities of a fixed number of partners. Of course, similar to a sole proprietorship. The partners can hire employees who have additional skills and abilities.
  • Raising capital can be difficult.
  • Because decision making among the partners is shared, disagreements can occur.
  • The business ends at the death or withdrawal of now partner unless otherwise stated in the partnership agreement.
  • The liquidity of each partner’s investment is low.

    General partnership is an association of two or more people, each with unlimited liability, who are actively involved in the business. In a general partnership each partner is a general partner, having specific authority, specific operational reponsibilities, and unlimited liability.

    General partnerships, like sole proprietorships, are relatively simple to establish, but their operation is somewhat more complicated. Partners must work very closely with each other, and the acts of one can legally commit or bind the rest. In a general partnership all partners can be held personally responsible for any business -related debts incurred by one partner.

    General partnership refers a partnership in which at least one partner has unlimited liability for the debts of the business and has authority to act and make binding decisions in the business.

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