Partnership

A partnership is a business organization in which two or more individuals or entities hold themselves out to the public as co-owners engaged in an operation for the purpose of making a profit. Partnerships need not be registered as entities with any state. Therefore, they are not incorporated, unlike LLCs and corporations, which must file formation documents with a state to start doing business. All owners of partnerships are equally and personally liable for the debts and obligations of the partnership, and all owners have unlimited liability. So, unlike limited liability companies and corporations, the owners of partnerships are not protected by a corporate veil. Partnerships can operate without a formal, written agreement. By default, they are subject to the partnership tax provisions of the Internal Revenue Code, although they may elect to be treated differently. Most startups and new companies launch as either LLCs or corporations, and it’s very unusual to see a startup formed as partnerships. Some professional organizations and groups, such as doctors, lawyers, and CPAs form limited liability partnerships (LLPs); those are a type of partnership that is formed by filing organizational, founding documents with a state, and they enjoy limited liability protections. LLPs are unique to professionals and not commonly formed.