A
partnership involves two or more individuals contracting/agreeing with
each
other to form a business. Contributions to the partnership may vary
between the
parties such as one partner may contribute money and another may
contribute
labor.
A
general partnership has unlimited liability to each partner. Creditors
can
collect the entire amount due from any partner.
Unless
the partnership agreement specifies something different, each partner
is taxed
on their proportional share of the profits of the partnership. The
partnership
itself does not usually pay any federal income tax. All partners shall
have
equal rights in the management of the partnership business unless they
specify
something to the contrary in their agreement.
In
a "limited" partnership, there is at least one general partner who
has unlimited liability as described above. The other investors are
"passive" and as such they have no management powers and are
protected from unlimited liability.