We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
Partnerships General: A Comprehensive Guide to Legal Structures
Definition & Meaning
A partnership is a type of business arrangement where two or more individuals come together to operate a business for profit. Each individual, known as a partner, contributes money, assets, or effort and shares in the ownership and responsibilities of the business. Partnerships can be formed through formal written agreements, oral agreements, or even informal arrangements like a handshake. Partners are collectively responsible for the debts and obligations of the partnership, regardless of who incurred them. Management decisions, profits, and losses are typically shared according to each partner's investment percentage.
Table of content
Legal Use & context
Partnerships are commonly used in various legal contexts, particularly in business law. They can be relevant in areas such as contract law, tax law, and liability law. Partnerships often require specific legal forms to establish the terms of the agreement, including the distribution of profits and responsibilities among partners. Users can manage partnership agreements and related documents using legal templates from resources like US Legal Forms, which are drafted by qualified attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: Two friends decide to open a coffee shop together. They agree to split the initial investment and profits equally. This arrangement forms a partnership.
Example 2: A group of three investors enters into a partnership to develop real estate. They each contribute different amounts of capital and agree on how profits and responsibilities will be shared. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Partnership Requirements
California
Requires a written partnership agreement for certain types of partnerships.
New York
Allows partnerships to be formed with or without a written agreement, but a written agreement is recommended.
Texas
Partnerships can be informal, but a written agreement is advisable to clarify terms.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Partnership
A business arrangement between two or more individuals.
Partners share profits, losses, and management responsibilities.
Sole Proprietorship
A business owned and operated by a single individual.
Only one owner; no shared responsibilities or profits.
Corporation
A legal entity separate from its owners.
Owners (shareholders) have limited liability; management is separate from ownership.
Common misunderstandings
What to do if this term applies to you
If you are considering entering into a partnership, it is essential to draft a partnership agreement that clearly outlines each partner's rights, responsibilities, and profit-sharing arrangements. You can find ready-to-use legal form templates on US Legal Forms to help you create a solid partnership agreement. If your situation is complex or involves significant assets, it may be wise to consult a legal professional for tailored advice.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.