Partnership (continues...)

Types of partnership

There are several types of partnerships. The two most common types are general partnerships and limited partnerships.

A general partnership can be formed simply by an oral partnership agreement between two or more persons, but a legal partnership agreement drawn up by an attorney is highly recommended. Legal fees for drawing up a partnership agreement are higher than those for a sole proprietorship, but may be lower than incorporating.

A partnership agreement could be helpful in solving any disputes. However, partners are responsible for the other partner's business actions, as well as their own.

What a partnership agreement should include

A Partnership Agreement should include the following:

• Type of business
• Amount of equity invested by each partner.
• Division of profit or loss.
• Partner's compensation.
• Distribution of assets on dissolution.
• Duration of partnership.
• Provisions for changes or dissolving the partnership in Dispute settlement clause.
• Restrictions of authority and expenditures.
• Settlement in case of death or incapacitation.