A business partnership is a type of business entity that is formed in order to achieve certain business goals. Generally speaking, a partnership is formed whenever two or more individuals come together to form an organization. In a partnership, each partner shares in profits and gains as well as losses. Partners may contribute resources such as property, labor, assets, and money. Partnerships may either be general or limited depending on their aims
Partnerships tend to be less permanent than other business forms such as corporations. This is because partnerships are sometimes formed only for specific business purposes. Once the goal has been achieved (such as the creation of a joint product), the partnership may sometimes terminate. Some other reasons why a partnership termination or dissolution may occur include:
- One of the partners has becomes deceased, incapacitated, or has filed for bankruptcy (general partnerships usually dissolve immediately if one of the partners cannot proceed)
- Disputes have arisen between the partners
- One of the partners has retired or is planning on retiring
- The partnership has grown to the point that the partners wish to incorporate it to form a more permanent business entity
Partnerships can also terminate according to specific terms set out in a partnership agreement. Lastly, a partnership can also dissolve by operation of law (for instance, if the partnership is illegal or is found to be engaged in illegal activity).
The main difference between a general partnership and a limited partnership is that a general partnership will usually dissolve immediately if one of the partners becomes deceased or can’t participate any longer in the partnership for whatever reason.On the other hand, a limited partnership certain partners (called "limited partners") can withdraw from the partnership. The limited partnership will continue on because such partners don’t normally share in any of the responsibilities or management duties for the partnership.
Dissolving or terminating a partnership can often have major consequences on the business interests of those involved. You may wish to hire a business lawyer if you need help with any type of partnership or business issues. Your attorney can provide you advice on your options and can inform you of the laws in your state. Also, your lawyer can guide you through the dissolution process and can represent you in court if you need to file a lawsuit over a dispute.