Chapter 12 - Partnerships Flashcards
Partnership
A business with two or more owners that is not organized as a corporation
Partnership Agreement
The contract between partners that specifies such items such as name, location, & nature of the business; the name, capital contribution, & duties of each partner; and the method of sharing profits & losses among the partners.
Limited Life
Any change with existing partners causes the old partnership to dissolve, which is the ending of a partnership.
Mutual Agency
Every partner is a mutual agent of the firm. Anything that partners agree to independent of one another, & involves daily operations, directly affects the business.
Unlimited Liability
Each partner has unlimited personal liability for the debts of the business.
Co-Ownership of Property
Any asset contributed to the partnership, becomes the property of the partnership.
No Partnership Income Tax
A partnership pays no business income tax, but do still pay individual income tax.
Partners’ Capital Accounts
Each partner has a separate capital account
Types of Partnership
General & Limited
General Partnership
Each partner is a co-owner of the business with all the privileged & risks of ownership.
Limited Partnerships
Must be at least one general partner who takes primary responsibilities.
A limited partner is usually an investor that doesn’t participate in the day-day operations of the partnership & has limited liability for partnership debts. Usually have first claim to profits/losses but up to a limit.
Limited Liability Partnership
It’s designed to protect partners from each other’s fuck ups.
Limited Liability Company
It’s a marriage of a partnership & corporation and includes both advantages. Partners are called members.
S Corporation
A corporation with 100 or fewer stockholders that can elect to be taxed as a partnership.
Statement of Partners’ Equity
Summary of the changes in each partners capital account. Beginning Capital \+ partner contributions \+ net income - partner withdrawals = partner's capital
