Partnership law rules the legal business entity created as a joint effort between two or more persons, groups of individuals, companies or corporations. In the United States, partnership law is established by each state's individual government.
Most partnerships are one of several types:
The difference in partnership types involves degrees of liability and taxation responsibilities. Partnership law dictates that the partnership is not a taxable entity but rather the income provided to each partner is taxed according to their share of partnership income/profits. Liability for partners is determined by the partnership structure and investment of each partner. General partners are liable personally for partnership debt; limited partners are somewhat protected. With the growing popularity of LLPs and LLCs, speaking to a partnership law attorney is essential when forming a business. This will ensure the business is properly established in the eyes of the law and the IRS.