|
|
The benefit of a general partnership is that you have someone with whom to share the business burden and responsibilities. It will cost less, and will require less paperwork versus a corporation.
You may be required to file a partnership certificate registering the company's name, and perhaps obtain a business license as well. These requirements vary from state to state, county to county, and city to city.
If you have a general partnership, you must file a partnership information return with the IRS each year. This tells the IRS and state officials how much the partnership earned or lost, and how those gains and losses are to be divided among the partners. The partnership itself does not pay income taxes. Instead, the partners report this information and pay taxes on their shares on their personal returns.
The disadvantage of partnerships is that you are personally responsible for your partner's liablilities related to the business. One partner can take actions that legally bind the partnership, even if all the partners were not consulted or knowledgeable of the action. Each partner is also personally liable for injuries caused by another partner on company business.
