A voluntary association of two or more persons who jointly own and carry on a business for a profit. Under the Uniform Partnership Act, a partnership is presumed to exist if the persons agree to share proportionally the business’s profits or losses.
A partnership is only one step beyond a sole proprietorship. It is when two people work together in business with an agreement to share the profit. In some states Partnerships are considered to be an entity. That means that the partnership can exist separate from the partners. It can own property, sign contracts, lease land, sue and be sued. The flip side, though, is that the partnership does not offer limited liability. That means, if the partnership runs short of money to pay debts, the creditors can look to the personal assets of the partners to satisfy the debt. If you are sued as a partnership and the business cannot afford to pay what it owes, the creditor may put a lien on your personal car or house to satisfy that judgment.
Partnerships are assumed. If two people come together to share proportionally in a business’s profits or losses, it is assumed there is a partnership. That is very important if you decide to give a family member money or take some money from a family member to start your business. If repaying the money is contingent on profits in the business, then a partnership may be assumed between you and your family member.