Partnerships Essay

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PARTNERSHIPS 1 Running Head: PARTNERSHIPS Business Law II Park University PARTNERSHIPS 2 Abstract In this paper I will discuss the characteristics and formalities of the following form of business. A partnership is defined as two or more owners, which enables each individual partner the right to make business decisions and a share of all the profits of the business equally. PARTNERSHIPS 3 PARTNERSHIPS One of the most important decisions to make when starting a business is the form of business you chose. The decision is important because the owner’s liability and control of the business varies among the different forms of business. Partnerships are relatively easy to create due to there being no formalities in creating one. A partnership may be formed either orally or with a written agreement. One advantage of having a written agreement is that the partners are able to define their rights and duties. If there is no written agreement in the relationship as partners, the default rules of the Revised Uniform Partnership Act of 1944 (RUPA) determines the rights of the partners. The RUPA defines a partnership as “an association of two or more persons to carry on as co-owners of a business for profit.” A partnership can be two individuals who begin making furniture in their garage, selling the furniture to others, and splitting the profits and the expenses. Therefore, a partnership has been formed even if neither has ever uttered the word partnership. PARTNERSHIPS 4 A major attraction to forming a partnership can be contributed to the fact that it requires no formalities and may be formed by default. Just as all income in a sole proprietorship is the income of the owner, in a partnership the income belongs to the partners and therefore is reported on each individual partner’s income tax return. Likewise, any

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