Partnership is an arrangement where two or more people or entities agree to enter into a business together. The “agreement” does not need to be anything formal or even written. In fact most partnerships are based on only a handshake, and in the absence of a written agreement terms will be implied by the state’s partnership act. This creates a problem in that in the beginning, everyone is on the same page, but as times goes on, memories change as do the partner’s expectations for the operations of the partnership. Remember the old saying, “good fences made good neighbors.” The same is true about good partnership written agreements.

Just as with a sole proprietorship, legally, a partnership is inseparable from it owners. As a result, each partner (with the exception of limited partners in a limited partnership) is personally liable for the entire amount of any business related obligations. This is called, “jointly and severally” liable There is no security from creditors with a Partnership as they can pursue personal assets of the partners to satisfy debts incurred by the business. Once again, in most cases it makes no sense to operate a business from a partnership.