A partnership is a type of business entity in which partners/owners share with each other the profits or losses of the business undertaking in which all have invested. Partnerships are often favored over corporations for taxation purposes, as the partnership structure does not generally incur a tax on profits before it is distributed to the partners i.e. there is no dividend tax levied. However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as shareholders of a corporation.
In partnerships there are two types of partners:
1. General partners are those who have an obligation of strict liability to third parties incurred by the Partnership. General partners may have a joint liability or a joint and several liabilities depending upon circumstances. The liability of limited partners is limited to their investment in the partnership.
2. A silent partner is one who still shares in the profits and losses of the business, but who is uninvolved in its management, and/or whose association with the business is not publicly known.
