Business Definition for: partnership
partnership
form of business organization created by an agreement between two or more persons who contribute capital and/or their services to the organization. Advantages are: (1) it is easily established with minimal organizational effort and costs; and (2) it is free from special government regulation. Disadvantages are: (1) it carries unlimited liability for the individual partners (firms organized as co-partnerships do not dissolve with the death or withdrawal of a partner); (2) it is dissolved upon the withdrawal or death of any of the partners; and (3) its ability to raise large amounts of capital is limited.
general partner
are those who are responsible for the day-to-day operations of the partnership and who are responsible for the partnership's total liabilities, while
limited partner
are those who contribute only money, who are not involved in management decisions, and whose liability is limited to their investment.
partnership
contract between two or more people in a joint business who agree to pool their funds and talent and share in the profits and losses of the enterprise. Those who are responsible for the dayto-day management of the partnership's activities, whose individual acts are binding on the other partners, and who are personally liable for the partnership's total liabilities are called general partners. Those who contribute only money and are not involved in management decisions are called limited partners; their liability is limited to their investment.
Partnerships are a common form of organization for service professions such as accounting and law. Each accountant or lawyer made a partner earns a percentage of the firm's profits.
Limited partnerships are also sold to investors by brokerage firms, financial planners, and other registered representatives. These partnerships may be either public (meaning that a large number of investors will participate and the partnership's plans must be filed with the Securities and Exchange Commission) or private (meaning that only a limited number of investors may participate and the plan need not be filed with the SEC). Both public and private limited partnerships invest in real estate, oil and gas, research and development, and equipment leasing. Some of these partnerships are oriented towards offering tax advantages and capital gains to limited partners, while others are designed to provide mostly income and some capital gains.
See also
limited partnership
,
public limited partnership
,
general partner
,
private limited partnership
,
oil and gas limited partnership
partnership
organization of two or more persons who pool some or all of their money, abilities, and skill in a business and divide profit or loss in predetermined proportions.
partners
are individually responsible for debts of the partnership. However, in a
limited partnership
, limited partners generally assume no monetary responsibility beyond the capital originally contributed. Death of a
general partner
will normally terminate the partnership.
partnership
an agreement between 2 or more entities to go into business or invest. Either partner may bind the other, within the scope of the partnership. Each partner is liable for all the partnership's debts. A partnership normally pays no taxes, but merely files an information return. The individual partners pay personal income tax on their share of
income
. Compare with
corporation
.
Example: Abel and Baker form a partnership to buy land. The partnership owns the property, rather than Abel and Baker.
See also
limited partnership
,
general partner
Related Terms:
organization made up of a general partner, who manages a project, and limited partners, who invest money but have limited liability, are not involved in day-to-day management, and usually cannot lose more than their capital contribution. Usually limited partners receive income, capital gains, and tax benefits; the general partner collects fees and a percentage of capital gains and income. Typical limited partnerships are in real estate, oil and gas, and equipment leasing, but they also finance movies, research and development, and other projects. Typically, public limited partnerships are sold through brokerage firms, for minimum investments of $5,000, whereas private limited partnerships are put together with fewer than 35 limited partners who invest more than $20,000 each.
real estate, oil and gas, equipment leasing, or other limited partnership that is registered with the Securities and Exchange Commission and offered to the public through registered broker/dealers. Such partnerships may be oriented to producing income or capital gains, or, within passive income rules, to generating tax advantages for limited partners. The number of investors in such a partnership is limited only by the sponsor's desire to cap the funds raised. A public limited partnership, which does not have an active secondary market, is distinguished from a private limited partnership, which is limited to 35 limited partners plus accredited investors, and a Master Limited Partnership (MLP) that is publicly traded, often on the major stock exchanges.
- member of a partnership who is jointly and severally liable for all debts incurred by the partnership-that is, a partner who does not have limited liability.
- managing partner of a limited partnership who is in charge of its operations. A general partner has unlimited liability. See also limited partner.
limited partnership not registered with the Securities and Exchange Commission (SEC) and having a maximum of 35 limited partners
partnership consisting of one or more limited partners and one or more general partners that is structured to find, extract, and market commercial quantities of oil and natural gas. The limited partners, who assume no liability beyond the funds they contribute, buy units in the partnership, typically for at least $5,000 a unit, from a broker registered to sell that partnership. All the limited partners' money then goes to the general partner, the partner with unlimited liability, who either searches for oil and gas (an exploratory or wildcat well), drills for oil and gas in a proven oil field (a developmental drilling program), or pumps petroleum and gas from an existing well (a completion program). The riskier the chance of finding oil and gas, the higher the potential reward or loss to the limited partner. Conservative investors who mainly want to collect income from the sale of proven oil and gas reserves are safest with a developmental or completion program.
Subject to passive income rules, limited partners also receive tax breaks, such as depreciation deductions for equipment used for drilling and oil depletion allowances for the value of oil extracted from the fields. If the partnership borrows money for increased drilling, limited partners also can get deductions for the interest cost of the loans.
organization made up of a general partner, who manages a project, and limited partners, who invest money but have limited liability, are not involved in day-to-day management, and usually cannot lose more than their capital contribution. Usually limited partners receive income, capital gains, and tax benefits; the general partner collects fees and a percentage of capital gains and income. Typical limited partnerships are in real estate, oil and gas, and equipment leasing, but they also finance movies, research and development, and other projects. Typically, public limited partnerships are sold through brokerage firms, for minimum investments of $5,000, whereas private limited partnerships are put together with fewer than 35 limited partners who invest more than $20,000 each.
- member of a partnership who is jointly and severally liable for all debts incurred by the partnership-that is, a partner who does not have limited liability.
- managing partner of a limited partnership who is in charge of its operations. A general partner has unlimited liability. See also limited partner.
Referring Terms:
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