BROWSE

Partnership

Definition

A partnership is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations may partner to increase the likelihood of each achieving their mission and to amplify their reach. A partnership may result in issuing and holding equity or may be only governed by a contract.

What is a 'Partnership'

A partnership is an arrangement in which two or more individuals share the profits and liabilities of a business venture. Various arrangements are possible: all partners might share liabilities and profits equally, or some partners may have limited liability. Not every partner is necessarily involved in the management and day-to-day operations of the venture. In some jurisdictions, partnerships enjoy favorable tax treatment relative to corporations. 

Explaining 'Partnership'

In a broad sense, a partnership is any cooperative endeavor undertaken by multiple parties. These parties can be governments, non-profits, businesses, individuals, or a combination, and the goals of the partnership can vary widely. There may or may not be a written agreement governing the partnership, but it is generally a good idea to lay out specific terms at the outset, so that disagreements can be settled according to predetermined rules. In some cases such an agreement is legally required.

Legal Treatment

The basic arrangements described above (with the exception of LLLPs) are widespread in common law jurisdictions such as the United States, Britain and the Commonwealth. There are, however, differences between the laws in these jurisdictions, and individuals looking to found a partnership should seek professional legal advice. In the U.S., each state has its own laws governing partnerships. There is no federal statute that defines the various forms of partnership, but the a majority of states have adopted one form or another of the Uniform Partnership Act, which has undergone a number of revision between 1914 and 1997.

Tax Treatment

While there is no federal statute defining partnerships in the U.S., the Internal Revenue Code (chapter 1 subchapter K) includes detailed rules on federal tax treatment. Partnerships do not pay income tax; it passes through to the partners. Partners are not considered employees for tax purposes. Individuals in partnerships may receive more favorable tax treatment than if they had founded a corporation; corporate profits are taxed, as are the dividends paid to owners. Partnerships' profits, on the other hand, are not double taxed in this way.


Further Reading


The economics of infrastructure finance: Public-private partnerships versus public provision
www.econstor.eu [PDF]
We examine the economics of infrastructure finance, focusing on public provision and Public-Private Partnerships (PPPs). We show that project finance is appropriate for PPP projects, because there are few economies of scope and because assets are project specific …

The political economics of investment Utopia: public–private partnerships for urban infrastructure financeThe political economics of investment Utopia: public–private partnerships for urban infrastructure finance
www.tandfonline.com [PDF]
We examine the economics of infrastructure finance, focusing on public provision and Public-Private Partnerships (PPPs). We show that project finance is appropriate for PPP projects, because there are few economies of scope and because assets are project specific …

Partnership, equity-financing and Islamic finance: whither profit-loss sharing?Partnership, equity-financing and Islamic finance: whither profit-loss sharing?
papers.ssrn.com [PDF]
We examine the economics of infrastructure finance, focusing on public provision and Public-Private Partnerships (PPPs). We show that project finance is appropriate for PPP projects, because there are few economies of scope and because assets are project specific …

The basic public finance of public–private partnershipsThe basic public finance of public–private partnerships
academic.oup.com [PDF]
We examine the economics of infrastructure finance, focusing on public provision and Public-Private Partnerships (PPPs). We show that project finance is appropriate for PPP projects, because there are few economies of scope and because assets are project specific …

Factors influencing intention to use diminishing partnership home financingFactors influencing intention to use diminishing partnership home financing
www.emerald.com [PDF]
We examine the economics of infrastructure finance, focusing on public provision and Public-Private Partnerships (PPPs). We show that project finance is appropriate for PPP projects, because there are few economies of scope and because assets are project specific …

Interpreting risk allocation mechanism in public–private partnership projects: an empirical study in a transaction cost economics perspectiveInterpreting risk allocation mechanism in public–private partnership projects: an empirical study in a transaction cost economics perspective
www.tandfonline.com [PDF]
We examine the economics of infrastructure finance, focusing on public provision and Public-Private Partnerships (PPPs). We show that project finance is appropriate for PPP projects, because there are few economies of scope and because assets are project specific …

The economics of public-private partnershipsThe economics of public-private partnerships
www.jstor.org [PDF]
We examine the economics of infrastructure finance, focusing on public provision and Public-Private Partnerships (PPPs). We show that project finance is appropriate for PPP projects, because there are few economies of scope and because assets are project specific …

Public–private partnership projects in Greece: risk ranking and preferred risk allocationPublic–private partnership projects in Greece: risk ranking and preferred risk allocation
www.tandfonline.com [PDF]
We examine the economics of infrastructure finance, focusing on public provision and Public-Private Partnerships (PPPs). We show that project finance is appropriate for PPP projects, because there are few economies of scope and because assets are project specific …

How expensive are cost savings? On the economics of public-private partnershipsHow expensive are cost savings? On the economics of public-private partnerships
www.econstor.eu [PDF]
We examine the economics of infrastructure finance, focusing on public provision and Public-Private Partnerships (PPPs). We show that project finance is appropriate for PPP projects, because there are few economies of scope and because assets are project specific …



Q&A About Partnership


Who shares profits and liabilities?

Partners share both profits and liabilities.

Is there more than one type of partnership?

Yes, there are different types of partnerships.

Are there different types of partnerships?

Yes, there are various arrangements possible.

What is a partnership?

A partnership is an arrangement in which two or more individuals share the profits and liabilities of a business venture.

What does it mean to have limited liability?

Limited liability means that partners are only responsible for debts up to the amount they have invested in the venture.

Is every partner involved with management and day-to-day operations of the venture?

Not necessarily, some partners may not be involved with management and day-to-day operations of the venture. However, all partners must agree on fundamental decisions such as how much money will be put into starting the business, what products will be sold, etc.. All partners must agree on major issues such as these before any money is spent or any product is sold. This agreement should take place at the outset so that disagreements can be settled according to predetermined rules if they do arise later on down the road. In some cases this agreement is legally required by law (for example, LLLPs). It's generally a good idea to lay out specific terms at the outset so that disagreements can be settled according to predetermined rules if they do arise later on down the road (for example, LLLPs). It's generally a good idea to lay out specific terms at the outset so that disagreements can be settled according to predetermined rules if they do arise later on down the road (for example, LLLPs). It's generally a good idea to lay out specific terms at the outset so that disagreements can be settled

Are partnerships limited to businesses or can they be other types of organizations?

Partnerships may include businesses, interest-based organizations and governments.

How do partnerships contribute to the Commercial Revolution?

Partnerships contributed to the Commercial Revolution by increasing trade among cities in the Hanseatic League.

How many partners can be involved in a partnership?

Two or more partners can be involved in a partnership.

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