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When one or more people agree to assume unlimited personal liability and responsibility for management of the business, a general partnership exists.
What is general partnership?
A general partnership is a type of business organization when two or more people concur to divide all the assets, profits, and monetary and legal obligations of a jointly owned company. In a general partnership, partners consent to unrestricted liability, which means that obligations are uncapped and may be settled with the asset forfeiture of an owner. Additionally, any partner could be held liable for the obligations of the company.
Since taxes do not pass via the general partnership, each individual is accountable for their individual tax liabilities, including partnership earnings, on their income tax returns.
General partnerships give participants the freedom to set up their companies anyway they see fit, allowing partners to have more direct control over corporate operations.
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