Guide To Understanding
A partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which all have invested.
In most countries, a partnership is a nominate contract between individuals who, in a spirit of cooperation, agree to carry on an enterprise; contribute to it by combining property, knowledge or activities; and share its profit. Partners may have a partnership agreement, or declaration of partnership and in some jurisdictions such agreements may be registered and available for public inspection. In many countries, a partnership is also considered to be a legal entity, although different legal systems reach different conclusions on this point.
Partnerships are often favored over corporations for taxation purposes, as a partnership structure eliminates the dividend tax levied upon profits realized by the owners of a corporation.
The most basic form of partnership is a general partnership, in which all partners manage the business and are personally liable for its debts. Two other forms which have developed in most countries are the limited partnership (LP), in which certain "limited partners" relinquish their ability to manage the business in exchange for limited liability for the partnership's debts, and the limited liability partnership (LLP), in which all partners have some degree of limited liability.