A partnership is a business structure involving two or more individuals. Each partner shares the liabilities and responsibilities of the business along with the profits made. Similar to sole proprietorships, general partnerships are unincorporated businesses. However, for this type of business structure, you’ll need to create a partnership agreement formalizing the terms of the partnership, such as owner percentages, rules for sharing profits and losses, and management rights. For tax purposes, each partner must file an annual information return using form 1065, where they declare their share of profits and losses from the business. A partnership may be a suitable option for startup businesses, as long as the partners trust each other’s business judgment and are prepared to deal with the financial and legal consequences of each other’s actions.
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