“Always ask you accountant or attorney
which business entity is best suited for your particular needs!”
There are three main business formations possible when creating a new business enterprise: the sole proprietorship; the partnership; the corporation. There are general and limited forms of partnerships and regular and subchapter S corporations. While they all have particular advantages and limitations the partnership formation is one that is fraught with many risks. Further, other formations, especially the subchapter S corporation, offer more advantages without as much risk-particularly in the area of liability. Before analyzing the future of partnerships, it is necessary to define this type of formation. A partnership is a “contract among persons to conduct a business and share the profits and losses. In partnerships, two or more join together to share assets and talent to make a business. A legal partnership agreement is drawn up for signature by all parties. The agreement defines the nature of the partnership, details what each partner is to contribute, how each is to be rewarded, and addresses such issues as might arise in the future,” (Sizer Warner 32). The partnership must file a tax return but pays no taxes itself. The money the partners receive is taxable income.
Partnerships are like a marriage where both individuals contribute to the relationship in order to produce a total that is more than the sum of their efforts. Partnerships do offer, as marriages, quite a few advantages. First of all partners have a great deal of flexibility. They may define their relationship in any manner they choose. The partnership agreement worked out consists of any details agreed upon by the partners concerning issues like capital contributions, duties to be performed, and provisions regarding a partner’s leaving the business. Yet, as with marriages, there are potential risks associated with a partners...