In a general partnership, two or more people share ownership of a single business. The partners manage the business and are responsible for all debts and obligations of the business. The details of this partnership agreement should be written out formally to define the roles of each partner, including what would happen if the business fails. You don't have to file special forms or pay fees to start your business. When forming a partnership, you should create a Partnership Agreement documenting the profit/loss sharing arrangement to avoid difficulties down the road.
Main advantages:
- Simple and inexpensive to create and operate
- Owners (partners) reports profit or loss on his or her personal tax return
Main drawbacks:
- Owners (partners) personally liable for business debts
- Owner is personally liable for partners' or employees' actions
If you are unsure of which structure is best for your business, you can visit a New Jersey Small Business Development Center. Some business owners also seek professional advice from an attorney or accountant.
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