14 Aug Advanced Accounting
A partnership is a group of two or more persons, who have decided to start a business. A partnership is simple to create with a governing document, articles of partnership. The articles outline the nature of the business, the rights and responsibility of each partner, the method in which profit/losses are allocated and method to settle a partner"s interest in case of withdrawal, retirement and death, as well as other legal issues that may arise.
There are many advantages to operating as partnership. Two reasons for organizing as a partnership are the ease and cost of formation. In addition, there are two tax benefits that exist within a partnership (1) the income created by the partnership is only taxed through the partners and (2) the partner can reduce other taxable income by any operating losses of the partnership.
How would you react to putting into writing a partnership agreement when you are a person of your word and do not understand why there is a need for a written agreement since you and your partner have an understanding?
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