General Partnership
Two or more owners sharing ownership, management, and liability.
Advantages
- Profits/losses flow to personal returns
- Simple to form and dissolve
Disadvantages
- Joint liability — each partner responsible for ALL debts
- Partner disputes without a solid agreement can be costly
Requirement
- Written partnership agreement: contributions, profit splits, buyout, disputes
Tax Filing
- Form 1065 (partnership return)
- Schedule K-1s issued to each partner
Limited Liability Partnership (LLP)
Combines partnership flexibility with limited liability protection for certain partners.
Structure
- General partner: full management authority, unlimited liability
- Limited partners: protected beyond their investment
- Common in professional services (law, accounting, consulting)
Tax Filing
- Form 1065 + Schedule K-1s (same as General Partnership)
Key Consideration for Both
Each partner owes self-employment tax on their share of income.
Trust alone is not enough — formalize everything in writing.
Before you partner up:
Engage an attorney to draft a comprehensive partnership agreement covering capital contributions, profit/loss splits, decision-making authority, buyout provisions, and dispute resolution.